Manufacturing productivity in indian states- does investment climate matter?
01 Jan 2005-Vol. 40, Iss: 24, pp 2413-2420
About: The article was published on 2005-01-01 and is currently open access. It has received 36 citations till now. The article focuses on the topics: Productivity.
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Journal Article•
TL;DR: In this article, the authors used three different techniques, growth accounting, production function accounting for endogeniety (semi-parametric) and stochastic production frontier (parametric), to compute the TFP growth of Indian manufacturing for both formal and informal sectors.
Abstract: Very few other issues in Indian economic development has generated so much debate than the measurement of total factor productivity (TFP) growth in Indian manufacturing. This debate has intensified following the major economic reforms in 1991. Using three different techniques – growth accounting (non-parametric), production function accounting for endogeniety (semi-parametric) and stochastic production frontier (parametric) – the paper computes the TFP growth of Indian manufacturing for both formal and informal sectors from 1994-95 to 2005-06. The results indicate that the TFP growth of formal and informal sector has differed greatly during this period and that the estimates are sensitive to the technique used. This suggests that any inference on productivity growth in India since the economic reforms of 1991 is conditional on the method of measurement used, and that there is no unambiguous picture emerging on the direction of change in TFP growth in post-reform India.
51 citations
TL;DR: In this article, the authors make use of a new and detailed database on FDI approvals since the early 1990s to address two major issues related to FDI and regional development in India in the post-reform period.
Abstract: We make use of a new and detailed database on FDI approvals since the early 1990s to address two major issues related to FDI and regional development in India in the post-reform period. First, we analyze the location choices of foreign investors. The evidence indicates that the concentration of FDI in a few relatively advanced regions may have prevented FDI effects from spreading across the Indian economy. Second, we evaluate whether the link between FDI and economic growth has become stronger in the aftermath of reforms. Various categories of FDI are indeed positively correlated with per-capita income growth across Indian states. However, it is only for the richer states that FDI appears to be associated with higher growth. FDI is thus likely to increase regional income disparity in India. ; We make use of a new and detailed database on FDI approvals since the early 1990s to address two major issues related to FDI and regional development in India in the post-reform period. First, we analyze the location choices of foreign investors. The evidence indicates that the concentration of FDI in a few relatively advanced regions may have prevented FDI effects from spreading across the Indian economy. Second, we evaluate whether the link between FDI and economic growth has become stronger in the aftermath of reforms. Various categories of FDI are indeed positively correlated with per-capita income growth across Indian states. However, it is only for the richer states that FDI appears to be associated with higher growth. FDI is thus likely to increase regional income disparity in India. ; Direktinvestition; Regionale Entwicklung; Standortwahl; Regionale DisparitA¤t; SchA¤tzung; Indien; FDI approvals , sub-categories of FDI , location choice , economic growth , regional divergence;
41 citations
Cites background from "Manufacturing productivity in india..."
...For example, Sachs et al. (2002) find a tendency towards divergence across Indian states.44 Kochhar et al. (2006), Purfield (2006) as well as Veeramani and Goldar (2006) all refer to growing concerns that economic progress is leaving some states behind....
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TL;DR: The authors examines recent micro-evidence on the productivity of Indian firms, helping to explain why India's manufacturing sector has not performed as well as many observers expected, and suggests that much remains to be done to improve the strength and sustainability of India's development path.
Abstract: This article examines recent micro-evidence on the productivity of Indian firms, helping to explain why India’s manufacturing sector has not performed as well as many observers expected. A series of structural distortions are documented, all of which may depress the performance of manufacturing, and thus the economy as a whole. These distortions exist at multiple levels, and reflect long-standing problems with the reallocation of labour across sectors, the excessively small scale of firms, low firm turnover, poor product market integration, high industry concentration and persistent state ownership. Combined, these phenomena represent severe restraints on the level and growth of productivity in manufacturing, and suggest that much remains to be done to improve the strength and sustainability of India’s development path.
39 citations
Posted Content•
TL;DR: In this paper, the authors developed a new measure of development, namely, development quality index (DQI), to compare performance of China and India, and found that national level development quality grew three times faster in China than in India.
Abstract: The paper develops a new measure of development, namely, development quality Index (DQI), to compare performance of China and India. The results show that national level development quality grew three times faster in China than in India. Conversely, the health quality grew three times as fast in India than China over the period 1980-2004. The overall regional development quality level improved in both countries, but polarization widened in China. The sign of inter-regional polarization in China indicates a rising concentration of development gains from economic reform policies, while in recent years there are trends of polarization in economic dimension of DQI in India.
29 citations
Cites background from "Manufacturing productivity in india..."
...…levels could explain differential level of economic growth performance.7 (See Nagaraj et al 2000, Sachs et al 2002, Aghion et al 2003, Krishna 2004, Veeramani and Goldar 2005, Agarwal and Basu 2005, Virmani 2006, and Basu 2006a) By looking at the polarization measures to understand…...
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Posted Content•
TL;DR: In this paper, the authors exploited 2-digit level industry data for the period 1981-2004 to ascertain the interlinkage between a monetary policy shock and industry value added and found that industries exhibit differential response to a monetary tightening and both interest rate and financial accelerator variables tend to be important in explaining the differential response.
Abstract: The study exploits 2-digit level industry data for the period 1981-2004 to ascertain the interlinkage between a monetary policy shock and industry value added. Accordingly, we first estimate a Vector Auto Regression (VAR) model to ascertain the magnitude of a monetary policy shock on industrial output. Subsequently, we try to explain the observed heterogeneity in terms of industry characteristics. The findings indicate that (a) industries exhibit differential response to a monetary tightening and (b) both interest rate and financial accelerator variables tend to be important in explaining the differential response.
16 citations
References
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TL;DR: In this article, the authors examine the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time.
Abstract: Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
26,011 citations
TL;DR: In this paper, the authors estimate the respective contributions of institutions, geography, and trade in determining income levels around the world, using recently developed instrumental variables for institutions and trade, and conclude that the quality of institutions "trumps" everything else.
Abstract: We estimate the respective contributions of institutions, geography, and trade in determining income levels around the world, using recently developed instrumental variables for institutions and trade. Our results indicate that the quality of institutions “trumps” everything else. Once institutions are controlled for, conventional measures of geography have at best weak direct effects on incomes, although they have a strong indirect effect by influencing the quality of institutions. Similarly, once institutions are controlled for, trade is almost always insignificant, and often enters the income equation with the “wrong” (i.e., negative) sign. We relate our results to recent literature, and where differences exist, trace their origins to choices on samples, specification, and instrumentation.
3,768 citations