Firm heterogeneity and India's manufacturing exports: Lessons on protection and trade theory

Abstract

Empirical examinations of heterogeneity among Indian manufacturing firms provide helpful lessons for trade theories and policies. Using descriptive statistics of cross-section data for 2011, 2015, and 2019, the asymptotic Wilcoxon-Mann-Whitney test, and regression analysis, the study reveals that firms are heterogeneous within each 4-digit National Industrial Classification (NIC) category, exporting firms are more productive than non-exporters, and exporter premia decline with trading activities. The study concludes that recent protectionist policies reduced extensive trade margins, firm heterogeneity, and productivity in the Indian manufacturing sector.