 Effect of the Rate of Return Regulation on Optimality of Input Use, Productivity and Profitability of Firms in the Indian Automobile IndustryHrushikesh Panda
Indian Economic Review, 1997, vol. 32, issue 1, 65-87 Abstract: Important conclusions of the paper are that contrary to theoretical expectation, regulation on rate of return to capital (RORC) did not result in a greater than optimal degree of capital intensity of production of firms. Firms also had an incentive in terms of an increase in profit margin (PTM) to bring about growth in total factor productivity (TFP). After deregulation, because of competitive pressures, there was a negative effect of TFP on PTM of the medium and heavy commercial vehicle producing firms. Though they operated in monopoly markets, firms, in general, did not earn monopoly rent because of the regulation on RORC. However, given lags in adjustment of prices of vehicles to changes in the average cost of production, changes in input prices had a negative effect on PTM. The regulation on RORC was on individual firm basis and was such that in the car segment, a more efficient firm earned a lower PTM. JEL-codes: K20 L51 L61 (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:dse:indecr:v:32:y:1997:i:1:p:65-87 Ordering information: This journal article can be ordered from Access Statistics for this article Indian Economic Review is currently edited by Pami Dua (Editor) & Ram Singh (Associate Editor) and Sunil Kanwar More articles in Indian Economic Review from Department of Economics, Delhi School of Economics University of Delhi, Delhi 110 007. Contact information at EDIRC. |
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