Intensive and extensive margins of exports: What can India learn from China?

C Veeramani, Lakshmi Aerath and Prachi Gupta

The World Economy, 2018, vol. 41, issue 5, 1196-1222

Abstract: We decompose India's export performance in manufactured products during 2000–15 into changes at the intensive and extensive margins. India's performance, along different margins, is compared and contrasted with that of China. The results show that while China outperforms India at both the margins, the gap is particularly wide at the intensive margin. Decomposition of intensive margin along quantity and price margins shows that Chinese products are generally sold cheaper than Indian products. Higher price margin, however, has not translated into high intensive margin for India due to its abysmally low quantity margin. We examine different explanations for China's superior performance relative to India, along different margins, using a gravity model. Our results suggest that China's exchange rate policy was not the prime reason for its export success. Neither do we find that FDI inflows were significant in explaining the export performance gap between them. The results show that China's export relationship bias towards high†income partner countries holds the key in understanding its superior performance. This bias is a natural consequence of China's high degree of specialization in labor†intensive activities. India, by contrast, due to an idiosyncratic pattern of specialisation, has failed to exploit its export potential in high income countries.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1111/twec.12592

Related works:
Working Paper: Intensive and extensive margins of exports: What can India learn from China? (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:41:y:2018:i:5:p:1196-1222

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().