Asha Sundaram

The Impact of Trade Liberalization on Micro Enterprises: Do Banks Matter? Evidence from Indian Manufacturing

This paper looks at the impact of trade liberalization on micro enterprises with differential access to banks. I use Indian data on rural micro enterprises employing less than ten workers in the manufacturing sector to find that trade liberalization, measured by a fall in the tariff, is associated with a larger increase or a smaller decrease in output, capital–labour ratio and labour productivity in districts with a larger number of bank branches per capita. Evidence is consistent with strong complementarities between trade liberalization effects, and the economic dynamism and access to financial intermediation associated with greater bank presence in the enterprises location. The study underscores that trade liberalization can be beneficial to micro entrepreneurs under certain conditions and emphasizes reallocation resulting from trade liberalization. The study hence highlights the role for development policy in exploiting gains from trade.

Complementarity between Formal and Informal Manufacturing in India: The Role of Policies and Institutions

In this paper, we have investigated the relationship between the formal and informal manufacturing sectors in India. We find that the employment, output and the value added of the informal part of each of the manufacturing industries in the various Indian states are strongly positively correlated with the same variables for the formal part of the respective industry in these states. Our results provide support for complementarities between formal and informal manufacturing arising possibly from both agglomeration and outsourcing. We also find fairly strong support for the role of labor market flexibility in enabling this complementarity. Trade liberalization also turns out to have an important role.

External liberalization by India and China: recent experience and future challenges

Purpose - In this study, the authors aim to analyze Indias trade performance from the period of liberalization until the recent financial crisis, and compare it to Chinas. Design/methodology/approach - The authors then examine Indian trade and investment policy and also institutional factors that potentially determine these trade patterns and performance, especially where they differ from Chinas. Findings - Finally, the authors highlight future trade policy challenges for India and also provide suggestions to ensure strong growth in trade and integration with the global market. Originality/value - This paper contributes by performing a comparative analysis of the Indian and Chinese experiences under trade liberalization and also by outlining potential challenges for Indian trade policy in the future.

Peers and Tiers and US High-Tech Export Controls: A New Approach to Estimating Export Shortfalls

In this study, we employ a diff erence-in-diff erence, gravity-equation approach to quantifying the trade impact of hightechnology export controls that are motivated by national security. We estimate the eff ect of controls on high-tech export performance of the United States, of its traditional rival (peer) exporters, and of emerging exporters. Using an 11-year panel of seven high-tech sectors from 1994 through 2004, we find that the United States under-exports to “high-threat” importers. We find, more surprisingly, that the United States over-exports to “medium-threat” importers and to a large “trusted” group of importers, both relative to a norm (default group) of importers. We find that traditional peer exporters under-export to the trusted group of importers, and along with emerging exporters, under-export to most medium-threat importers. Th ese findings, robust in a comparable dataset ending in 2011, suggest high substitutability between export suppliers and export markets for high-tech products. Th e same peer exporters over-export to high-threat importers, suggesting their less stringent enforcement of multilateral export controls and also undermining to a certain extent, the security objective of the very strictest of these controls. Overall, importers deemed security threats import only half of their high-tech potential from the 10 exporters on which we focus. Our study underlines the importance of current American eff orts to reform the export control regime to make it more target-eff ective.

The Effects of Labor Regulation on Firms and Exports: Theory and Evidence from Indian Apparel

Building on a detailed analysis of qualitative data collected from formal Indian apparel manufacturers and sector experts, we develop a theory to predict the effects of labor regulations on monopolistically competitive manufacturing firms’ production decisions. The theory clarifies how these decisions may differ between firms producing for domestic and export markets. We then test the model’s predictions using establishment-level data on formal Indian apparel manufacturers for 2009-10 and 2010-11 and interstate variation in labor laws. We find a close fit between the theory, the qualitative evidence and the quantitative data – a finding that survives multiple robustness checks and instrumental variables estimation. Apparel producers in states with inflexible labor regulations tend to replace labor with capital, producing more output per worker, and hiring fewer workers. This effect is smaller for exporting firms, which are more tightly bound to international norms for organizing production. Pro-labor regulations select against less productive firms, especially in the export sector. Our theory shows that labor regulations have ambiguous effects on firm capital stocks and output levels, and no empirical effect on these outcomes is detectable. Our findings allow us to comment on the likely efficacy of various types of labor reforms being advocated to spur industrial activity and employment in labor-abundant developing countries.

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

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.

Country of origin and employment prospects among immigrants: an analysis of south-south and north-south migrants to South Africa

We study the relationship between country of origin and employment prospects for immigrants to South Africa, an emerging host country characterized by high levels of unemployment, labour market imperfections and a scarcity of skills. Using the 2001 South African census, we estimate the probability of being employed for working-age immigrant men and South African internal migrants. We find that, conditional on individual characteristics and education levels, the probability of being employed varies by country of origin, and that it is different for immigrants relative to native internal migrants. Immigrants from advanced countries outperform natives, while those from certain central, west-African and Asian countries underperform them. Additionally, results indicate that education increases the probability of employment for immigrants from all countries. These probabilities converge at high levels of education, resulting in greater dispersion of employment probabilities across countries at lower levels of education.