Industry structure, foreign trade and price‐cost margins in Indian manufacturing industries

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Abstract
The influence of industry concentration, foreign trade and protection on price‐cost margins in Indian manufacturing industries are examined with the use of multiple regression analysis. The tests show that import‐competition dampens the margins while protection has the opposite effect. Moreover industries with relatively higher exports appear to have higher margins. Industry concentration shows an inverted‐U‐shaped influence. This result may be due to restraints by large firms that apprehend anti‐monopoly regulation. However an empirical test suggests that the result may also be due to the effect of X‐inefficiency and/or higher wages in the more concentrated industries.

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