Competition and Demographics in Large Indian Cities

Author: Mohammad Amin
Source: The World Bank, November 2007

Between 1991 and 2001, the number of adult non-workers per household showed a secular decline in most parts of India. The decline was as sharp as 18.6 percent in the state of Haryana, 12.7 percent in Kerala and 12.6 percent in Punjab. The paper estimates the likely effect of these changes on market competition using micro data on retail stores in India. Specifically, we find a strong effect of adult non-workers per household on the level of competition. A move from the 25th percentile to the lowest value of adult non-workers per household lowers the proportion of stores facing significant competition in the city by 16.6 percentage points, a large effect given that only 38.2 percent of the stores in the sample face significant competition. We provide additional evidence which suggests that our findings are consistent with the broader literature on search cost and competition.

Download paper