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India's Mysterious Manufacturing Miracle

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Author Info

  • Albert Bollard

    (Stanford University)

  • Peter Klenow

    (Stanford University)

  • Gunjam Sharma

    (University of Missouri)

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    Abstract

    Using data on formal manufacturing plants in India, we report a large but imprecise speedup in productivity growth starting in the early 1990s (e.g., 1993-2007 compared to 1980-1992). We trace it to productivity growth within large plants (200 workers or more), as opposed to reallocation across such plants. As many economists believe Indian reforms during this era improved resource allocation, the absence of a growth pickup from reallocation is surprising. Moreover, when we look across industries we fail to robustly relate productivity growth to prominent reforms such as industrial de-licensing, tariff reductions, FDI liberalization, or lifting of small-scale industry reservations. Even under a generous reading of their effects, these reforms (at least as we measure them) account for less than one-third of the rapid productivity growth in Indian manufacturing from 1980-2007. (Copyright: Elsevier)

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    File URL: http://dx.doi.org/10.1016/j.red.2012.10.007
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    Bibliographic Info

    Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

    Volume (Year): 16 (2013)
    Issue (Month): 1 (January)
    Pages: 59-85

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    Handle: RePEc:red:issued:11-75

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    Related research

    Keywords: Misallocation; productivity; economic growth; India; manufacturing;

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    References

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    1. John Fernald & Brent Neiman, 2003. "Measuring productivity growth in Asia: do market imperfections matter?," Working Paper Series WP-03-15, Federal Reserve Bank of Chicago.
    2. Ariel Burstein & Andrew Atkeson, 2009. "Innovation, Firm Dynamics, and International Trade," 2009 Meeting Papers 186, Society for Economic Dynamics.
    3. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
    4. Amil Petrin & T. Kirk White & Jerome P. Reiter, 2009. "The Impact of Plant-Level Resource Reallocations and Technical Progress on U.S. Macroeconomic Growth," Working Papers 09-43, Center for Economic Studies, U.S. Census Bureau.
    5. Panagariya, Arvind, 2008. "India: The Emerging Giant," OUP Catalogue, Oxford University Press, number 9780195315035, February.
    6. Basu, Susanto & Fernald, John G., 2002. "Aggregate productivity and aggregate technology," European Economic Review, Elsevier, vol. 46(6), pages 963-991, June.
    7. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
    8. Petia Topalova & Nina Pavcnik & Amit Khandelwal & Penny Goldberg, 2009. "Multi-product Firms and Product Turnover in the Developing World: Evidence from India," 2009 Meeting Papers 176, Society for Economic Dynamics.
    9. Pinelopi Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2009. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," Working Papers 1179, Princeton University, Department of Economics, Center for Economic Policy Studies..
    10. Susanto Basu & Luigi Pascali & Fabio Schiantarelli & Luis Serven, 2009. "Productivity, Welfare and Reallocation: Theory and Firm-Level Evidence," NBER Working Papers 15579, National Bureau of Economic Research, Inc.
    11. Chang, Tai Hsieh & Peter, J- Klenow, 2007. "Misallocation and manufacturing TFP in China and India," MPRA Paper 35084, University Library of Munich, Germany, revised 15 Jun 2007.
    12. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/298767, Katholieke Universiteit Leuven.
    13. Lucia Foster & John Haltiwanger & Chad Syverson, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," Working Papers 05-11, Center for Economic Studies, U.S. Census Bureau.
    14. Bulent Unel, 2003. "Productivity Trends in India's Manufacturing Sectors in the Last Two Decades," IMF Working Papers 03/22, International Monetary Fund.
    15. Sivadasan Jagadeesh, 2009. "Barriers to Competition and Productivity: Evidence from India," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-66, September.
    16. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
    17. Charles R. Hulten & Sylaja Srinivasan, 1999. "Indian Manufacturing Industry: Elephant or Tiger? New Evidence on the Asian Miracle," NBER Working Papers 7441, National Bureau of Economic Research, Inc.
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