TY - UNPB

T1 - Chinese Competition and Product Variety of Indian Firms

AU - Chakraborty, Pavel

AU - Henry, Michael

PY - 2018/9

Y1 - 2018/9

N2 - 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 effect of product drop, with the effect coming only from competitive pressure in the domestic market; (ii) evidence of product drop or 'creative destruction' is robust only for the lower-half of the size distribution; (iii) firms drop their peripheral/marginal products and concentrate on the core ones; and (iv) our result is most strong for firms producing intermediate goods. For an average Indian manufacturing firm, 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 as when firms are importing intermediate goods. We also find evidence of significant productivityeffects and within-firm factor reallocation. Our results are consistent to a battery of robustness checks and IV estimation.

AB - 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 effect of product drop, with the effect coming only from competitive pressure in the domestic market; (ii) evidence of product drop or 'creative destruction' is robust only for the lower-half of the size distribution; (iii) firms drop their peripheral/marginal products and concentrate on the core ones; and (iv) our result is most strong for firms producing intermediate goods. For an average Indian manufacturing firm, 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 as when firms are importing intermediate goods. We also find evidence of significant productivityeffects and within-firm factor reallocation. Our results are consistent to a battery of robustness checks and IV estimation.

KW - Chinese Competition

KW - Product Drop

KW - Domestic Market

KW - Small Firms

M3 - Working paper

T3 - Economics Working Papers Series

BT - Chinese Competition and Product Variety of Indian Firms

PB - Lancaster University, Department of Economics

CY - Lancaster

ER -