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Productivity growth of Indian manufacturing sector: panel estimation of stochastic production frontier and technical inefficiency

Author

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  • S Madheswaran
  • Hailin Liao
  • Badri Narayan RathAuthor-Email: smadhes@yahoo.co.uk

    (Institute for Social and Economic Change, India
    Loughborough University, UK
    Institute for Social and Economic Change, India)

Abstract

Applying a Stochastic Production Frontier to sector-level data within manufacturing sector in India, this paper examines Total Factor Productivity (TFP) growth during 1979-80 to 1997-98. The analysis focuses on the trend of technical progress (TP) and Technical Efficiency Change (TEC). The empirical result suggests that the TFP growth in a large number of industries have improved during 1997-98 compared to 1980-81. TFP growth is mainly driven by TP not by TEC in case of Indian economy since the coefficient of TEC is negative. In the light of empirical results, the policy implication is that the priority to boost economic growth should be in the enhancement of productivity based catching-up capability. In this direction, an efficiency oriented action plan aimed to improve productivity efficiency of manufacturing sectors is required to be implemented for removing the fiscal and financial constraints faced by the enterprises which are located in industrially backward areas.

Suggested Citation

  • S Madheswaran & Hailin Liao & Badri Narayan RathAuthor-Email: smadhes@yahoo.co.uk, 2007. "Productivity growth of Indian manufacturing sector: panel estimation of stochastic production frontier and technical inefficiency," Journal of Developing Areas, Tennessee State University, College of Business, vol. 40(2), pages 35-50, January-M.
    • Handle: RePEc:jda:journl:vol.40:year:2007:issue2:pp:35-50
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    Cited by:

    1. Ritwik Mazumder & Maniklal Adhikary, 2010. "Measuring Technical Efficiency in the Indian Automobile Industry," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 11(1), pages 53-67, March.
    2. Chirayil, Anish, 2008. "Economic reform and Productivity Growth in Indian Paper and Paper Products Industry: A Nonparametric Analysis," MPRA Paper 16919, University Library of Munich, Germany.
    3. Rawat, Pankaj S. & Sharma, Seema, 2021. "TFP growth, technical efficiency and catch-up dynamics: Evidence from Indian manufacturing," Economic Modelling, Elsevier, vol. 103(C).
    4. Sabuj Kumar Mandal, 2009. "Technological Progress, Scale Effect and Total Factor Productivity Growth in Indian Cement Industry: Panel Estimation of Stochastic Production Frontier," Working Papers 216, Institute for Social and Economic Change, Bangalore.
    5. Gupta, Abhay, 2009. "Pre-reform Conditions, Intermediate Inputs and Distortions: Solving the Indian Growth Puzzle," MPRA Paper 14481, University Library of Munich, Germany.
    6. Wang, Lan-Hsun & Liao, Shu-Yi & Huang, Mao-Lung, 2022. "The growth effects of knowledge-based technological change on Taiwan’s industry: A comparison of R&D and education level," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 525-545.
    7. Ravi Kiran & Manpreet Kaur, 2007. "Is Liberalisation Associated with Higher Productivity? A Case Study of Punjab Manufacturing," Vision, , vol. 11(4), pages 53-65, October.
    8. Ipatova, Irina, 2015. "The dynamics of total factor productivity and its components: Russian plastic production," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 21-40.
    9. Swapnil Soni & M.H. Bala Subrahmanya, 2020. "Empirical Study of Industrial Classification, Structure, and Factor Intensity: An Enquiry into Dwindling Labor Intensity in a Labor-Surplus Economy," Emerging Economy Studies, International Management Institute, vol. 6(2), pages 201-213, November.
    10. Anthony Ilegbinosa Imoisi, 2018. "Is Trade Openness Suitable for Growth of the Nigerian Manufacturing Sector? An Autoregressive Distributed Lag Approach," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 4(2), pages 71-82, June.
    11. Rath, Badri Narayan, 2018. "Productivity growth and efficiency change: Comparing manufacturing- and service-based firms in India," Economic Modelling, Elsevier, vol. 70(C), pages 447-457.
    12. Ipatova, Irina & Peresetsky, Аnatoly, 2013. "Technical efficiency of Russian plastic and rubber production firms," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 32(4), pages 71-92.

    More about this item

    Keywords

    Total Factor Productivity; Technical Efficiency change; Technological Progress; Stochastic Production Frontier; Indian Economy;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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