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The Productivity-Wage And Productivityemployment Nexus - A Panel Data Analysis Of Indian Manufacturing

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  • Mita Bhattacharya
  • Paresh K. Narayan
  • Stephen Popp
  • Badri N. Rath

Abstract

This paper investigates the long-run relationship between labour productivity and employment, and between labour productivity and real wages in the case of the Indian manufacturing sector. The panel data set consists of 17 two-digit manufacturing industries for the period 1973-74 to 1999-2001. We find that productivity-wages and productivity-employment are panel cointegrated for all industries. We find that both employment and real wages exert a positive effect on labour productivity. We argue that flexible labor market has a significant influence on manufacturing productivity, employment and real wages in case of Indian manufacturing.

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File URL: http://www.buseco.monash.edu.au/units/dru/papers/working-papers-09/09-07productivitybhattacharyanarayanpopprath.pdf
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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Development Research Unit Working Paper Series with number 07-09.

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Length: 34 pages
Date of creation: 02 Apr 2009
Date of revision:
Handle: RePEc:mos:druwps:2009-07

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Keywords: Labour Productivity; Real Wages; Panel Unit Root Tests; Panel Cointegartion Tests; Manufacturing.;

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  1. Krishna, Pravin & Mitra, Devashish, 1998. "Trade liberalization, market discipline and productivity growth: new evidence from India," Journal of Development Economics, Elsevier, vol. 56(2), pages 447-462, August.
  2. Devashish Mitra & Beyza Ural, 2009. "Indian manufacturing: A slow sector in a rapidly growing economy," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 18(1), pages 205-205.
  3. Lall, Somik V. & Shalizi, Zmarak & Deichmann, Uwe, 2004. "Agglomeration economies and productivity in Indian industry," Journal of Development Economics, Elsevier, vol. 73(2), pages 643-673, April.
  4. David Canning & Peter Pedroni, 2008. "Infrastructure, Long-Run Economic Growth And Causality Tests For Cointegrated Panels," Manchester School, University of Manchester, vol. 76(5), pages 504-527, 09.
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  7. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  8. Pesaran, M.H., 2004. "‘General Diagnostic Tests for Cross Section Dependence in Panels’," Cambridge Working Papers in Economics 0435, Faculty of Economics, University of Cambridge.
  9. Peter Pedroni, 2001. "Purchasing Power Parity Tests in Cointegrated Panels," Department of Economics Working Papers 2001-01, Department of Economics, Williams College.
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  11. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
  12. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
  13. Bulent Unel, 2003. "Productivity Trends in India's Manufacturing Sectors in the Last Two Decades," IMF Working Papers 03/22, International Monetary Fund.
  14. Norman R. Swanson & Jeffery D. Amato, 2000. "The real-time predictive content of money for output," BIS Working Papers 96, Bank for International Settlements.
  15. Rashmi Banga, 2007. "Impact of Liberalisation on Wages and Employment in Indian Manufacturing Industries," Working Papers id:989, eSocialSciences.
  16. Hasan, Rana, 2002. "The impact of imported and domestic technologies on the productivity of firms: panel data evidence from Indian manufacturing firms," Journal of Development Economics, Elsevier, vol. 69(1), pages 23-49, October.
  17. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
  18. Raut, Lakshmi K., 1995. "R & D spillover and productivity growth: Evidence from Indian private firms," Journal of Development Economics, Elsevier, vol. 48(1), pages 1-23, October.
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