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Productivity Consequences of Product Market Liberalization: Micro-evidence from Indian Manufacturing Sector Reforms

dc.contributor.authorSivadasan, Jagadeesh
dc.date.accessioned2007-01-04T15:50:11Z
dc.date.available2007-01-04T15:50:11Z
dc.date.issued2006-10
dc.identifier1062en
dc.identifier.urihttps://hdl.handle.net/2027.42/49240
dc.description.abstractWe use a new plant-level dataset to study the effect of two reforms aimed at increasing product market competition in India -- liberalization of foreign direct investment (FDI) and reduction in tariff rates. First, we examine the effect of the liberalization policies on mean plant-level productivity in the liberalized industries. We find a 23% increase in productivity level following the FDI liberalization and a 33% increase following tariff liberalization (comparing mean value added log productivity levels in 1994-95 to the pre-reform 1987-90 period). We check the robustness of these results to: (a) using alternative measures of productivity; (b) using alternative definitions of the liberalization variable; and (c) inclusion of controls to address possible bias from the selection of industries into liberalization regimes. The tariff liberalization effect is generally robust; the FDI liberalization effect is 14%-16% when controlling for non-random selection. Next, we examine aggregate productivity growth in liberalized industries; we find a 16% (15.6%) increase following FDI (tariff) liberalization. This increase appears to be driven by improvement in intra-plant productivity growth, with a small role for re-allocation. Finally, we examine who benefited from the productivity gains; we find that the major beneficiaries were wholesale consumers (in the form of relatively lower wholesale output prices in the liberalized sectors).en
dc.format.extent1044660 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoen_US
dc.subjectForeign Direct Investmenten
dc.subjectTrade Liberalizationen
dc.subjectProductivityen
dc.subjectReallocationen
dc.subjectIndustrial Policyen
dc.subject.classificationBusiness Economicsen
dc.titleProductivity Consequences of Product Market Liberalization: Micro-evidence from Indian Manufacturing Sector Reformsen
dc.typeWorking Paperen_US
dc.subject.hlbsecondlevelEconomicsen_US
dc.subject.hlbtoplevelBusinessen_US
dc.contributor.affiliationumRoss School of Businessen
dc.contributor.affiliationumcampusAnn Arbor
dc.description.bitstreamurlhttp://deepblue.lib.umich.edu/bitstream/2027.42/49240/1/1062-Sivadasan.pdfen_US
dc.owningcollnameBusiness, Stephen M. Ross School of - Working Papers Series


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