Trade liberalization and volatility: Evidence from Indian firms

Asha Sundaram

Review of International Economics, 2019, vol. 27, issue 5, 1409-1426

Abstract: I look at the impact of trade liberalization on sales growth volatility of firms. Exploiting India’s externally imposed trade reform to identify trade liberalization effects, I find that while a fall in the tariff on the final product produced by the firm is associated with an increase in volatility in Indian manufacturing firms, a fall in the tariff on intermediate inputs is associated with a decrease in volatility, with the latter effect dominating the former. I hence propose an additional channel for gains from trade liberalization to the ones documented in the literature.

Date: 2019
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