Competition, Financial Constraints and Misallocation: Plant-Level Evidence from Indian Manufacturing

Research paper and working paper investigating the relationship between competition, financial constraints and misallocation

From:
Department for International Development
Published
21 January 2019
Country:
India
Document Type:
Research Paper
Theme:
Economic Growth
Authors:
Galle, S

Abstract

A commonly held and highly intuitive view is that intensified competition will improve the allocation of resources in an economy, by shifting resources to more productive firms. When firms are financially constrained however, increased competition undermines firms’ profitability, and thereby their capacity to accumulate capital through internally financed investment. This way, competition may not improve resource misallocation after all.

This research was funded under the Private Enterprise Development in Low-Income Countries (PEDL) Programme

Citation

  • Galle, S. Competition, Financial Constraints and Misallocation: Plant-Level Evidence from Indian Manufacturing. Research report (2019), PEDL

  • Galle, S. Competition, Financial Constraints and Misallocation: Plant-Level Evidence from Indian Manufacturing. Working paper (2016) 60 pp

Published 21 January 2019
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