پویایی ساختار بازار و تنظیم در سطح بنگاه به نفع بازار اصلاحات آزادسازی اقتصادی در هند، 1988-2006: A زمان متفاوت پانل صاف رگرسیون انتقال روش (TV-PSTR)

This paper for the first time employs the Time Varying Panel Smooth Transition Regression (TV-PSTR) approach to model the dynamic adjustments of firms and the evolution of industrial structure in the bigger setting of decades against the backdrop of India's dramatic liberalizing reform starting from 1991. Using Indian manufacturing firm data, it finds that the transition of market structure and productivity after liberalization did follow a smooth transition process. Instead of the previously assumed instantaneous ‘big-bang’ shift just after reforms, it actually took years for the Indian manufacturing industries start to react to the reforms, and the transitional impact of reforms took approximately four to eight years to complete. There is strong evidence of increased competition after the transition, with shrinked returns to scale (RTS) in most industries except for leather and chemical industries. The results on total factor productivity (TFP) are mixed: most import-competing industries, which suffer most from the shrinking of market size experienced no change or decreasing TFP growth; whereas the export-oriented industry, as the industry which benefits most from economy of scale, enjoyed a huge TFP growth following the reforms.

During the past several decades, lots of developing countries launched dramatic pro-market economic liberalization in an effort to attain higher growth. These liberalization efforts, broadly defined to include trade and entry liberalization, regulatory reform, ER regime reform and privatization, are believed to transform economies via more competition (domestic and foreign) and the removal of distortions in relative prices. Therefore it may bring the country welfare gains through several possible channels, which have been the questions receiving the extensive interests of country policy makers. First, it has been argued that, in imperfectly competitive markets, pro-market liberalization will bring welfare gains by reducing the dead weight losses created by domestic monopolies and oligopolies by increasing competition, and by reducing price-marginal cost markups.1 Secondly, there may be scale efficiency gain of trade by moving the firms down their average cost curves, thereby effectively raising firm size and scale efficiency. In addition, trade liberalization, as the major component of Indian pro-market liberalizing efforts, has been argued to have dynamic effects on firms' productivity growth through innovation.

In this paper, I employ the TV-PSTR model to investigate the transition dynamics of price–marginal cost markups, returns to scales (RTS) and productivity growth in Indian manufacturing industries associated with India's unexpected dramatic pro-market economic liberalizing reforms. Using Indian manufacturing firm level data for the period from 1988 to 2006. I find that the transition after liberalization does follow a smooth process, instead of the previously assumed instantaneous ‘big-bang’ shift just after reforms. The dynamic adjustments of industrial structure do not occur immediately after the primary reforms, and do not occur over the same time period for all industries. Also the length of the transition process varies across industries. It actually took years for Indian firms in manufacturing industries to react to the reforms, and the transitional impact of reforms takes approximately four to eight years to complete. There is strong evidence of increases in competition, which pushes down the markup and makes it possible to obtain welfare gains from reduction of dead weight losses by increasing competition and lower markups. Except for the leather industries, RTS in most industries shrink after the transition. As predicted by the endogenous growth theory, the effects of reforms on TFP are mixed, depending on whether trade is increasing its market size or not, and hence possibly encouraging or discouraging R&D and innovation. After the liberalization reforms, generally, import-competing industries which suffer heavily from the shrinking market size, experienced no significant increase in TFP growth; whereas the export-oriented industry, which benefit most from economy of scale, enjoyed a huge TFP growth in response to reforms. In terms of policy implication, it is important to facilitate exports and exploit returns to scale, and innovation spurring policy environment to stimulate productivity growth and counteract the possible disincentive to innovate caused by shrinking market size.