Learning Versus Stealing: How Important are Market-Share Reallocations to India's Productivity Growth?

42 Pages Posted: 31 Jan 2011 Last revised: 18 Apr 2011

See all articles by Ann E. Harrison

Ann E. Harrison

University of California, Berkeley; National Bureau of Economic Research (NBER)

Leslie A. Martin

University of Melbourne - Department of Economics

Shanthi Nataraj

RAND Corporation

Multiple version iconThere are 2 versions of this paper

Date Written: January 2011

Abstract

The new trade theory emphasizes the role of market-share reallocations across firms ("stealing") in driving productivity growth, while the older literature focused on average productivity improvements ("learning"). We use comprehensive, firm-level data from India's organized manufacturing sector to show that market-share reallocations did play an important role in aggregate productivity gains immediately following the start of India's trade reforms in 1991. However, aggregate productivity gains during the overall 20-year period from 1985 to 2004 were driven largely by improvements in average productivity. By exploiting the variation in reforms across industries, we document that the average productivity increases can be attributed to India's trade liberalization and FDI reforms. Finally, we construct a panel dataset that allows us to track firms during this time period; our results suggest that while within-firm productivity improvements were important, much of the increase in average productivity also occured because of firm entry and exit.

Suggested Citation

Harrison, Ann E. and Martin, Leslie A. and Nataraj, Shanthi, Learning Versus Stealing: How Important are Market-Share Reallocations to India's Productivity Growth? (January 2011). NBER Working Paper No. w16733. Available at SSRN: https://ssrn.com/abstract=1749892

Ann E. Harrison (Contact Author)

University of California, Berkeley ( email )

Giannini Hall
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Leslie A. Martin

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

HOME PAGE: http://lesliemartin.org

Shanthi Nataraj

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States
310-393-0411 (Phone)

HOME PAGE: http://www.rand.org/

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