Trade liberalization and heterogeneous firms’ adjustments: evidence from India
Maria Bas () and
Ivan Ledezma ()
Additional contact information
Maria Bas: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
In a developing country, trade liberalization affects firms' production choices through different channels: intensification of foreign competition, reductions of production factor costs, and enhanced access to foreign consumers and technology. Using firm-level data from India, we investigate how firms with different characteristics adjust their domestic sales and capital accumulation to output and input tariff changes. Our findings suggest that India's trade liberalization has heterogeneous effects depending on firms' export, import, ownership status and financial constraints. Firms serving only the domestic market have experienced a contraction of domestic sales and capital accumulation due to import competition. They were not able to benefit from the access to lower costs imported inputs and capital goods. Exporting and importing firms and foreign affiliates have expanded their sales and capital investments thanks to the reduction of imported inputs and capital goods costs and thereby, they have been able to face foreign competition. Our findings also suggest that credit constraints affect the relationship between trade liberalization and firms' capital accumulation. These findings are in line with recent models of trade with heterogeneous firms.
Keywords: Heterogeneous firms; Firm-level data; Firms’ domestic sales and capital accumulation; Trade liberalization (search for similar items in EconPapers)
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02483526
References: Add references at CitEc
Citations: Track citations by RSS feed
Published in Review of World Economics, Springer Verlag, 2020, 156 (2), pp.407-441. ⟨10.1007/s10290-019-00366-x⟩
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Trade liberalization and heterogeneous firms’ adjustments: evidence from India (2020)
Working Paper: Trade liberalization and heterogeneous firms’ adjustments: evidence from India (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-02483526
Access Statistics for this paper
More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().