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Trade Liberalization, Rival Exporters and Reallocation of Production: An Analysis of Indian Manufacturing

Author(s)
Lawrence Edwards and Asha Sundaram
Publication date
June 2015

Employing a difference-in-difference estimation technique on firm-level data on Indian exporters, we show that the removal of US textile and apparel quotas was associated with a relative increase in sales of products where India was previously quota-restricted,  but a relative decrease in sales of products where China was previously quota-restricted.  We hence highlight the importance of accounting for falling trade barriers for rival exporters in analyzing trade liberalization effects. Additionally, we find that previously more productive firms see a greater increase in sales, suggesting potential gains from reallocation in an environment where quota rights were not allocated efficiently.  

Publication PDF
Series title
Working paper 526
Journal
Review of International Economics
JEL classifications