Firm-Level Productivity and Exports: The Case of Manufacturing Sector in India
01 Jan 2020-pp 159-175
TL;DR: In this article, the authors compared the total factor productivity (TFP) between the exporting and non-exporting firms in manufacturing sector of India using data from the Centre for Monitoring Indian Economy (CMIE) from 2003 to 2015.
Abstract: This study differentiates total factor productivity (TFP) between the exporting and non-exporting firms in manufacturing sector of India. We use data from the Centre for Monitoring Indian Economy (CMIE) from 2003 to 2015. For a better understanding of the productivity distribution, we create two subgroups of sample based on firm age and size. Moving away from parametric tests this study adopts non-parametric statistics in testing the hypothesis. Productivity levels are found to be higher for the exporting firms as compared to the non-exporting firm. Further, within the exporting firms, those with larger firm size have higher productivity compared to the smaller firms.
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TL;DR: In the past 25 years or so, econometrics has grown at a very rapid pace, and has come to play a major role in the development of the economics discipline as mentioned in this paper .
Abstract: During the past 25 years or so, econometrics has grown at a very rapid pace, and has come to play a major role in the development of the economics discipline. Palgrave's Handbook of Econometrics in two volumes: edited by Mills and patters on: volume I-Econometric Theory (2006) and Volume 2: Applied Econometrics (2009), each volume with 10 parts and 29 chapters bears testimony to the diversified growth of both econometric theory and applied econometrics. The symposium on Recent Ideas in Econometrics published in the Journal of Economic Perspectives, Spring 2017 issue covers 6 themes, one in Econometric Theory, 4 in Applied Econometrics, and one on undergraduate econometrics instruction. Applied Econometrics has received much more attention than Econometric Theory in the twenty-first century. During the past five decades, many eminent economists have won the Nobel Prize in Economics for their seminal contributions in Applied Econometrics, beginning with Frisch and Tinbergen in 1969. Several institutions in Higher Education and Research in India have contributed much to the development of econometrics in India. The Econometric Society of India (TIES) founded by Mahalanobis and C R Rao, five decades ago, and the Journal of Quantitative Economics (JQE) founded in 1983 deserve credit for the development of Applied Econometrics in India. This essay attempts a selective review of Econometric Practice in India in the twenty-first century in the different fields of microeconometrics and macroeconometrics. The increased availability of a variety of databases and sophisticated econometric software have greatly facilitated applied econometric research in the country. However, a large proportion of colleges in India lack instructional and research resources for Applied Econometrics.
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TL;DR: Olley and Pakes as discussed by the authors show that when intermediate inputs (i.e., those inputs which are typically subtracted out in a value-added production function) can also solve this simultaneity problem, and discuss some potential benefits of expanding the choice set of proxies to include these inputs.
Abstract: Economists began relating output to inputs in the early 1800's. A large literature on estimating production functions has followed, in part because much of economic theory yields testable implications that are related to the technology and optimizing behaviour.1 Since at least as early as Marschak and Andrews (1944), applied researchers have worried about the potential correlation between input levels and the unobserved firm-specific productivity shocks in the estimation of production function parameters. The economics underlying this concern are intuitive. Firms that have a large positive productivity shock may respond by using more inputs. To the extent that this is true, ordinary least squares (OLS) estimates of production functions will yield biased parameter estimates, and, by implication, biased estimates of productivity. Many alternatives to OLS have been proposed, and we add to this set by extending Olley and Pakes (1996). They show the conditions under which an investment proxy controls for correlation between input levels and the unobserved productivity shock. Their approach has the advantage that, for many questions, it is no more difficult to implement than OLS. We show when intermediate inputs (those inputs which are typically subtracted out in a value-added production function) can also solve this simultaneity problem. We discuss some potential benefits of expanding the choice set of proxies to include these inputs.
3,901 citations
Book•
01 Jan 1981
TL;DR: In this paper, the authors provide a theory of selection with incomplete information that is consistent with these and other findings, and give rise to entry, growth, and exit behavior that agrees, broadly, with the evidence.
Abstract: Recent evidence shows that within an industry, smaller firms grow faster and are more likely to fail than large firms. This paper provides a theory of selection with incomplete information that is consistent with these and other findings. Firms learn about their efficiency as they operate in the industry. The efficient grow and survive; the inefficient decline and fail. A perfect foresight equilibrium is proved by means of showing that it is a unique maximum to discounted net surplus. The maximization problem is not standard, and some mathematical results might be of independent interest. 1. THEORY AND EVIDENCE ON THE GROWTH AND SURVIVAL OF FIRMS Do SMALL FIRMS grow faster than large firms? Are they less likely to survive? Early studies found no relation between the size of firms and their growth rates [8, 14, 16]. The growth of firms seemed to be proportional to their size. In later work, adjustment costs with constant returns to scale were shown to imply that firms should grow in proportion to their size [10, 11]. Recent evidence from larger samples tells a different story. Mansfield [13] finds that smaller firms have higher and more variable growth rates. Du Rietz [6], in a sample of Swedish firms, again finds that smaller firms grow faster, and that they are less likely to survive [6,8,13]. These findings conflict with the adjustment costs theory in which all firms grow at the same rate, and in which failure does not happen. To explain these deviations from the proportional growth law, I propose a theory of "noisy" selection. Efficient firms grow and survive; inefficient firms decline and fail. Firms differ in size not because of the fixity of capital, but because some discover that they are more efficient than others. The model gives rise to entry, growth, and exit behavior that agrees, broadly, with the evidence. The model also agrees with some more tentative findings. First, firm size and concentration seem to be positively related to rates of return.2 Second, the correlation over time of rates of return is higher for larger firms and in the concentrated industries [15, 17]. Third, the variability of rates of return at a point in time is higher in the concentrated industries [17]. Finally, higher concentration is associated with higher profits for the larger firms, but not for the smaller firms
2,931 citations
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TL;DR: The evidence is quite" clear on one point: good firms become exporters, both growth rates and levels of success measures" are higher ex-ante for exporters as mentioned in this paper.
Abstract: A growing body of empirical work has documented the superior performance characteristics" of exporting plants and firms relative to non-exporters. Employment, shipments and capital intensity are all higher at exporters at any given moment. This paper asks whether good" firms become exporters or whether exporting improves firm performance. The evidence is quite" clear on one point: good firms become exporters, both growth rates and levels of success measures" are higher ex-ante for exporters. The benefits of exporting for the firm are less clear. Employment" growth and the probability of survival are both higher for exporters; however growth is not superior, particularly over longer horizons.
2,923 citations
TL;DR: In this paper, the authors provide a model of firm and industry dynamics that allows for entry, exit, and firm-specific uncertainty generating variability in the fortunes of firms, focusing on the impact of uncertainty arising from investment in research and exploration.
Abstract: This paper provides a model of firm and industry dynamics that allows for entry, exit, and firm-specific uncertainty generating variability in the fortunes of firms. It focuses on the impact of uncertainty arising from investment in research and exploration. It analyzes the behavior of individual firms in an evolving market place and derives optimal policies, including exit. Then it adds an entry process and aggregates the optimal behavior of all firms, including potential entrants, into a rational expectations Markov-perfect industry equilibrium and proves ergodicity of the equilibrium process. Numerical examples illustrate the detailed characteristics of the stochastic process generating industry structures.
2,423 citations
TL;DR: A growing body of empirical work has documented the superior performance characteristics of exporting plants and firms relative to non-exporters as discussed by the authors, showing that good firms become exporters, both growth rates and levels of success measures are higher ex-ante for exporters.
2,416 citations