Chinese competition and product variety of Indian firms

Chakraborty, Pavel and Henry, Michael (2019) Chinese competition and product variety of Indian firms. Journal of Comparative Economics, 47 (2). pp. 367-395. ISSN 0147-5967

[thumbnail of ChineseComp_ProdVar_AcceptedManuscript_Dec2018]
PDF (ChineseComp_ProdVar_AcceptedManuscript_Dec2018)
ChineseComp_ProdVar_AcceptedManuscript_Dec2018.pdf - Accepted Version
Available under License Creative Commons Attribution-NonCommercial-NoDerivs.

Download (355kB)


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.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Comparative Economics
Additional Information:
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
Uncontrolled Keywords:
?? chinese competitiondomestic marketproduct dropsmall firmseconomics and econometrics ??
ID Code:
Deposited By:
Deposited On:
19 Mar 2019 11:40
Last Modified:
07 Nov 2023 01:00