Does services liberalization affect manufacturing firms' export performance? Evidence from India

- Services liberalization in India resulted in 6-8.5 in the probability of exporting for manufacturing firms.
- Services reform in India was associated with 5% export shares of manufacturing firms.
- The initially more productive manufacturing firms have benefited more from services liberalization.

This paper investigates the relationship between the reform of energy, telecommunications and transport services in India in the mid-1990s and manufacturing firms' export performance. The empirical analysis relies on exogenous indicators of regulation of Indian services sectors and detailed firm-level data from India in the 1994-2004 period. I find that the reform of upstream services sector has increased the probability of exporting and export sales shares of firms producing in downstream manufacturing industries. The results suggest that the effect of services liberalization on manufacturing firms' export performance is stronger for initially more productive firms. These empirical findings are robust to alternative econometric specifications that control for other reforms, industry, firm characteristics and that deal with potential reverse causality concerns.