Aggregate Productivity Growth in Indian Manufacturing : An Application of Domar Aggregation
AbstractProductivity growth in Indian manufacturing is an important driver of overall growth, yet the issues related to its measurement have still not been resolved. The issue of how to compute an aggregate productivity measure holds significance for two reasons : one, the productivity of a firm should reflect the productivity of the lower levels, which comprise the aggregate; and two, aggregate productivity should also emphasize the importance of inter-industry transactions in an analysis of productivity growth. Contributions from Domar (1961), Hulten (1978) and Jorgenson et al. (1987) have addressed the issue of measuring aggregate productivity. We have made an attempt to compute the aggregate productivity growth using the Domar aggregation technique. Building up from the Total Factor Productivity Growth (TFPG) estimates for 3-digit industries, we have used Domar weights to computed total factor productivity (TFP) growth for selected 10, 2-digit industries for the period 1980-2000. Comparing the estimates based on the Domar aggregation technique with those based on the traditional aggregate value added approach, we observe that the preferred estimates are about half of that obtained by the traditional aggregate value added method. This holds immense significance for any underlying productivity numbers.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22911.
Date of creation: Jan 2009
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Productivity growth; Domar aggregation; aggregate value added; Indian manufacturing;
Find related papers by JEL classification:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
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- Oulton,Nicholas & O'Mahony,Mary, 1994. "Productivity and Growth," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521453455.
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