Production bottleneck effects and role of market power: Evidence from India's dereservation reform

In this paper, I investigate how aggregate gains from reducing distortions within a market depend on the extent of market power in the production network. Improving a production bottleneck propagates to upstream suppliers as a demand shock, and to downstream customers as an input cost shock. I analyze the heterogeneous response of firms in these vertically linked markets using the elimination of firm–size restrictions products in India during the 2000s combined with a rich firm–level data set.

• India
• EDS
• Vybhavi Balasundharam
• production bottleneck