Session 1: Firms and Industry

Chair: B.N. Goldar (Institute of Economic Growth)

Presenters

  • Does firm ownership structure matter? Evidence from sugar mills in India – Sandip Sukhtankar (Dartmouth College)

  • Productivity and competition in India’s brick industry – Daniel Keniston (Yale University)

Discussant: Mohan Chutani (Department of Industrial Policy and Promotion)

Sandip Sukhtankar (Dartmouth College) presented his IGC project on “Does ownership structure matter? Evidence from sugarcane mills in India”. This paper examines the effect of firm ownership structure on firm behaviour and the economic outcomes of upstream suppliers by comparing privately owned sugar mills to cooperatives and public mills in India. The “command area” zoning system, whereby mills are given monopoly power to operate within an assigned area helps tackle the identification challenge. The borders of command areas allow for a geographic regression discontinuity design, where underlying soil, weather, and institutional characteristics are exactly the same but ownership structure changes across boundaries. Using satellite images overlaid on digital maps to measure sugarcane grown along the borders, and a survey to determine the effects of crop choices on farmer welfare, he finds that private mills encourage sugarcane production. Greater cane cultivation is tied to better credit provided by private mills, and results in higher income and consumption for land-poor farmers. The discussant, Mohan Chutani (Ministry of Commerce and Industry) noted that cooperatives were brought in to keep sugar prices lower, as it is an essential commodity; therefore it was risky if left only to the private sector. He suggested that the author should consider doing a comparative assessment of other countries’ sugar industry to make the analysis more robust.

Daniel Keniston (Yale University) presented his ongoing IGC project on “Productivity and competition in India’s brick industry”. He explores two main questions from his research in the brick industry, firstly, does this observed productivity dispersion really reflect unequal returns to capital across firms, and secondly, why does competition not drive this productivity dispersion to zero. The brick industry is huge in scale and this project includes data from 5% of the industry. He looks at decomposing physical productivity differences, within and across technology. The study is being conducted in some districts in Karnataka and eastern Uttar Pradesh. He also investigates if productivity differences in technology correlate with difference in output, quality and productivity, specially relating to fuel productivity. Mohan Chutani noted that the Indian brick industry in India has recently come up with greener alternatives. However, as this is a labour intensive sector in India, with better technology there will be employment-displacing effects. B.N. Goldar concluded by remarking there is a trade off here between preserving the environment and protecting employment, a difficult policy decision for any government.

Summary written by Noopur Abhishek – Country Economist, IGC India Central