Description:

Speaker: Alina Mulyukova

Title: "Services Liberalization and Product Variety of Manufacturing Firms"

Abstract: "This paper investigates the effect of liberalization in the services sector on downstream manufacturing firms' product scope and the distribution of sales across products. I combine firm-level panel data for India with the services reform measure and exploit variation across manufacturing firms in their exposure to service inputs as well as time variation in services reform in a two-way fixed effects framework. My analysis yields that reforms in the services sector significantly increased the number of products of manufacturing firms and decreased the concentration of sales. Looking further at the characteristics of added products, I find that firms add products in the same 3-digit industry as their core product, which leads to a within-firm cannibalization effect. I present a model of multi-product firms in the presence of within firm demand linkages. I document that reforms in the services sector decrease firms' fixed cost of product innovation, whereas having no effect on the variable cost."