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

44 Pages Posted: 21 Jul 2006

See all articles by Sumon K. Bhaumik

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

India Development Foundation; University of Gothenburg; University of Groningen, Faculty of Economics and Business, Students; Indian School of Public Policy

Shagun Krishnan

Indian Statistical Institute, New Delhi - India Development Foundation

Multiple version iconThere are 2 versions of this paper

Date Written: March 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 Bhaumik, Sumon K. and Gangopadhyay, Shubhashis and Krishnan, Shagun, Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector (March 2006). William Davidson Institute Working Paper No. 822, Available at SSRN: https://ssrn.com/abstract=918079 or http://dx.doi.org/10.2139/ssrn.918079

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

India Development Foundation ( email )

4101 DLF Phase IV
Gurugram, Haryana 122002
India
+91 9910991221 (Phone)

University of Gothenburg

Gothenburg
Sweden

University of Groningen, Faculty of Economics and Business, Students

Postbus 72
9700 AB Groningen
Netherlands

Indian School of Public Policy

Delhi
India

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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