Multiproduct Firms and Product Turnover in the Developing World: Evidence from India

This paper provides evidence on the patterns of multiproduct firm production in a large developing country, India, during a period that spans market reforms. In the cross-section, multiproduct firms in India look remarkably similar to their U.S. counterparts. The time-series patterns, however, exhibit important differences. In contrast to evidence from the United States, product churning, particularly product rationalization, is far less common in India. We find no link between product rationalization and output tariff declines following India's 1991 trade liberalization. The lack of "creative destruction" is consistent with the role of industrial regulation in preventing an efficient allocation of resources. (c) 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.