Import competition and vertical integration: Evidence from India

• 成果类型: Article
• 署名作者: Stiebale, Joel; Vencappa, Dev
• 署名单位: Heinrich Heine University Dusseldorf; University of Nottingham; University of Manchester; Alliance Manchester Business School; University of Manchester
• 刊物名称: JOURNAL OF DEVELOPMENT ECONOMICS
• ISSN/ISSBN: 0304-3878
• DOI: 10.1016/j.jdeveco.2021.102790
• 发表日期: 2022
• 关键词: trade liberalization; COMPETITION; vertical integration; markups; marginal costs

摘要

Recent theoretical contributions provide conflicting predictions about the effects of product market competition on firms' organizational choices. This paper uses a rich firm-product-level panel data set of Indian manufacturing firms to analyze the relationship between import competition and vertical integration. Exploiting exogenous variation from changes in India's trade policy, we find that foreign competition, induced by falling output tariffs, increases backward vertical integration by domestic firms. The effects are concentrated among firms with high productivity and in industries with relatively low initial levels of competition. In contrast, falling input tariffs seem to have countervailing effects on vertical integration incentives. We also provide evidence that vertical integration is associated with lower marginal costs and increasing markups at the firm-product level.