Learning versus Stealing: How Important Are Market-Share Reallocations to Indias Productivity Growth?

Abstract

Recent trade theory emphasizes the role of market-share reallocations across firms ("stealing") in driving productivity growth, whereas previous literature focused on average productivity improvements ("learning"). We use comprehensive, firm-level data from India's organized manufacturing sector to show that market-share reallocations were briefly relevant to explain aggregate productivity gains following the beginning of India's trade reforms in 1991. However, aggregateproductivity gains during the period from 1985 to 2004 were largely driven by improvements in average productivity. We show that India's trade, FDI, and licensing reforms are not associated with productivity gains stemming fr..