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

Edwards, L. and Sundaram, A. (2017)
Review of International Economics

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 and the unit value of products where China was previously quota restricted. Our study hence highlights the importance of accounting for falling trade barriers for rival exporters in analyzing trade liberalization effects. Additionally, we find evidence indicating that quota rights were not allocated efficiently, suggesting potential gains from reallocation with the dismantling of the Indian quota licensing regime.

url – http://onlinelibrary.wiley.com/doi/10.1111/roie.12279/full
courtesy – Wiley

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