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  • ChineseComp_ProdVar_AcceptedManuscript_Dec2018

    Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Comparative Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Comparative Economics 47,2, 2019 DOI: 10.1016/j.jce.2018.12.003

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    Embargo ends: 12/02/21

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Chinese competition and product variety of Indian firms

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>1/06/2019
<mark>Journal</mark>Journal of Comparative Economics
Issue number2
Volume47
Number of pages29
Pages (from-to)367-395
Publication statusPublished
Early online date12/02/19
Original languageEnglish

Abstract

Using detailed firm-product-year data across manufacturing industries in India, and exploiting the exogenous nature of China's entry into the WTO in 2001, we investigate the link between the impact of import penetration from China on the product variety of Indian manufacturing firms. We find: (i) robust and significant effects of product drop, with the effect coming only from competitive pressure in the domestic market; (ii) robust evidence of product drop or ‘creative destruction’ only for firms belonging to the lower-half of the size distribution; (iii) firms drop their peripheral/marginal products and concentrate on the core ones; and (iv) the result is strongest for firms producing intermediate goods. For an average Indian manufacturing firm, a 10 percentage point increase in India's Chinese share of imports in the domestic market reduces the product scope of firms by 1.7–4.4%. In contrast, we find positive effects on product scope when firms are importing intermediate goods. We also find evidence of significant productivity effects and within-firm factor reallocation. Our results are consistent to a battery of robustness checks and IV estimation.

Bibliographic note

This is the author’s version of a work that was accepted for publication in Journal of Comparative Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Comparative Economics 47,2, 2019 DOI: 10.1016/j.jce.2018.12.003