Technical regulations, intermediate inputs, and performance of firms: Evidence from India

Abstract

We estimate the consequences of maintaining restrictive Technical Barriers to Trade (TBT) measures on markups for manufacturing firms in India. We combine firm-product level data from Prowess with the data on TBTs that have been raised as a concern by member countries against India in the TBT committee of WTO. We find that higher TBT incidence on intermediate inputs to the industry leads to a decrease in markups for importers relative to non-importers. Firms absorb the increase in marginal costs by reducing markups with no significant increase in prices.