Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector

47 Pages Posted: 25 Apr 2006  

Sumon K. Bhaumik

Aston University - Aston Business School; Institute for the Study of Labor (IZA); University of Michigan at Ann Arbor - Stephen M. Ross School of Business, William Davidson Institute

Shubhashis Gangopadhyay

Indian Statistical Institute, New Delhi - India Development Foundation

Shagun Krishnan

Indian Statistical Institute, New Delhi - India Development Foundation

Multiple version iconThere are 2 versions of this paper

Date Written: April 2006

Abstract

It is now stylized that, while the impact of ownership on firm productivity is unclear, product market competition can be expected to have a positive impact on productivity, thereby making entry (or contestability of markets) desirable. Traditional research in the context of entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry. However, following De Soto (1989), there has been increasing emphasis on regulatory and institutional factors governing entry rates, especially in the context of developing countries. Using 3-digit industry level data from India, for the 1984-97 period, we examine the phenomenon of entry in the Indian context. Our empirical results suggest that during the 1980s industry level factors largely explained variations in entry rates, but that, following the economic federalism brought about by the post-1991 reforms, variations entry rates during the 1990s were explained largely by state level institutional and legacy factors. We also find evidence to suggest that, in India, entry rates were positively associated with growth in total factor productivity.

Keywords: entry, productivity, institutions, regulations, India, reforms

JEL Classification: L11, L52, L64, L67, O14, O17

Suggested Citation

Bhaumik, Sumon K. and Gangopadhyay, Shubhashis and Krishnan, Shagun, Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector (April 2006). IZA Discussion Paper No. 2086. Available at SSRN: https://ssrn.com/abstract=898590

Sumon K. Bhaumik (Contact Author)

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, West Midlands B47ET
United Kingdom

Institute for the Study of Labor (IZA) ( email )

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

University of Michigan at Ann Arbor - Stephen M. Ross School of Business, William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Shubhashis Gangopadhyay

Indian Statistical Institute, New Delhi - India Development Foundation ( email )

249 F, Sector 18
Udyog Vihar Phase IV
Gurgaon, Haryana 122015
India
+91 124 501 4055 (Phone)
+91 124 501 4080 (Fax)

Shagun Krishnan

Indian Statistical Institute, New Delhi - India Development Foundation ( email )

249 F, Sector 18
Udyog Vihar Phase IV
Gurgaon, Haryana 122015
India

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