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Market Integration, Demand, and the Growth of Firms: Evidence From a Natural Experiment in India

Jensen, Robert ; Miller, Nolan H.

The American economic review, 2018-12, Vol.108 (12), p.3583-3625 [Periódico revisado por pares]

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Título:
Market Integration, Demand, and the Growth of Firms: Evidence From a Natural Experiment in India
Autor: Jensen, Robert ; Miller, Nolan H.
Assuntos: Business growth ; Companies ; Consumer behavior ; Consumer prices ; Consumers ; Developing countries ; Economic integration ; LDCs ; Local products ; Market shares ; Prices ; Production costs ; Productivity ; Shipbuilding ; Specialization
É parte de: The American economic review, 2018-12, Vol.108 (12), p.3583-3625
Descrição: In many developing countries, the average firm is small, does not grow, and has low productivity. Lack of market integration and limited information on non-local products often leave consumers unaware of the prices and quality of non-local firms. They therefore mostly buy locally, limiting firms’ potential market size (and competition). We explore this hypothesis using a natural experiment in the Kerala boat-building industry. As consumers learn more about non-local builders, high-quality builders gain market share and grow, while low-quality firms exit. Aggregate quality increases, as does labor specialization, and average production costs decrease. Finally, quality-adjusted consumer prices decline.
Editor: Nashville: American Economic Association
Idioma: Inglês

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