This chapter is an attempt to empirically examine the relationship between
firm’s size and export-intensities of manufacturing firms in India in a discriminating
oligopoly model. The model predicts that in such a model, where the firm behaves like a
price taker in the world market and the domestic market is protected by prohibitive tariffs,
lower cost firms tend to produce more outputs and therefore export proportionately more
outputs. Using the unit level factory level data for the Indian economy for the year of
2009 from the Annual Survey of Industries, we test the propositions (1) firm level output
and the marginal cost of the firm and (2) export share of the firm and the firm size being
measured in terms of the fixed capital assets held by the firm. We further examine if
transport advantage in terms of costal location of the firms has any impact on the firm
export.
Keywords: Domestic market, Export, Firm size, International market, Oligopoly,
Open economy, Price discrimination.
