Trade productivity and markups

Abstract

The thesis analyses the impact of trade reforms on productivity growth and markups in India s organized manufacturing sector using the Annual Survey of Industries (ASI) plant level panel data. The period of analysis is from 1998-99 to 2007-08. The first core chapter examines aggregate industry level productivity growth and the role of market share reallocations (from least productive plants in favour of most productive plants) in driving the former. Further it analyses the role of trade reforms in generating these market share reallocations. We find that growth in aggregate productivity of manufacturing sector was largely driven by market share reallocations in the capital intensive industries. Labour intensive industries are found to have witnessed negative market share reallocations and low productivity growth. Econometric analysis suggests that reduction in tariff rates led to a rise in market share reallocations. These gains are also found to be higher in industries located in states with better labour market conditions and greater availability of industrial credit and electricity. newline