Using information on listed firms in each of the industry groups at
the two-digit level within Manufacturing this study investigates whether
the radical shift in trade policy in India in 1991 resulted in a reduction
in market power and/or an improvement in scale efficiency. We estimate
a group-wise production function allowing for firm-specific effects. A
plausible estimate of market power is obtained and the assumption of
constant returns to scale is mostly rejected. As regards the effects of the
trade-policy shock of 1991, evidence of a move to a more competitive
market structure or of an improvement in scale efficiency is not
widespread across Indian manufacturing.
JEL Classification: F12
Key words: Trade liberalisation; Market power; Scale Economie
