A Total Factor Productivity-Capital Accumulation Hypothesis of India’s Growth Transitions
AbstractThis paper re-examines the role of physical capital accumulation in the Indian economy over the period 1953-2010. As an alternative to the orthodox total factor productivity (TFP) view, the paper develops a combined TFP-capital accumulation hypothesis of growth transitions. The results show that the first phase of India’s faster-growing regime during 1980-2002 was mainly TFP driven. However, the large increase in uninvested profits accumulated during the first phase together with evidence of a sharp rise in the productivity of capital and an exogenous saving/investment rate implies that India had a significant amount of untapped long-run growth potential. Consistent with the prediction of the model, the growth surge experienced during 2003-2007 reflects the capital accumulation-driven part of the growth transition. Despite the turbulent years of the global financial crisis since 2008, the analysis suggests that physical capital accumulation will continue to be a driving force of India’s future growth performance.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 1313.
Length: 51 pages
Date of creation: Jul 2013
Date of revision:
physical capital accumulation; total factor productivity; Solow model; learning by doing model; growth; India; technical progress function;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
- O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-20 (All new papers)
- NEP-CWA-2013-07-20 (Central & Western Asia)
- NEP-DGE-2013-07-20 (Dynamic General Equilibrium)
- NEP-EFF-2013-07-20 (Efficiency & Productivity)
- NEP-FDG-2013-07-20 (Financial Development & Growth)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ghate, Chetan & Wright, Stephen, 2012.
"The “V-factor”: Distribution, timing and correlates of the great Indian growth turnaround,"
Journal of Development Economics,
Elsevier, vol. 99(1), pages 58-67.
- Chetan Ghate & Stephen Wright, 2008. "The "V-Factor": Distribution, Timing and Correlates of the Great Indian Growth Turnaround," Discussion Papers of DIW Berlin 783, DIW Berlin, German Institute for Economic Research.
- Chetan Ghate & Stephen Wright, 2009. "The "V-Factor": Distribution, Timing and Correlates of the Great Indian Growth Turnaround," Jena Economic Research Papers 2009-010, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Jonathan Temple, 2003. "The Long-Run implications of Growth Theories," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 497-510, 07.
- Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2004.
"Capital Accumulation and Growth: A New Look at the Empirical Evidence,"
Boston College Working Papers in Economics
591, Boston College Department of Economics, revised 02 Aug 2007.
- Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2010. "Capital accumulation and growth: a new look at the empirical evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1073-1099, November/.
- Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2004. "Capital Accumulation and Growth: A New Look at the Empirical Evidence," Economics Papers 2004-W08, Economics Group, Nuffield College, University of Oxford.
- Bond, Steve & Leblebicioglu, Asli & Schiantarelli, Fabio, 2004. "Capital Accumulation and Growth: A New Look at the Empirical Evidence," IZA Discussion Papers 1174, Institute for the Study of Labor (IZA).
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991.
"Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?,"
Cowles Foundation Discussion Papers
979, Cowles Foundation for Research in Economics, Yale University.
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
- Tom Doan, . "KPSS: RATS procedure to perform KPSS (Kwiatowski, Phillips, Schmidt, and Shin) stationarity test," Statistical Software Components RTS00100, Boston College Department of Economics.
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
- Temple, Jonathan, 1998. "Equipment Investment and the Solow Model," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 39-62, January.
- Panagariya, Arvind, 2008.
"India: The Emerging Giant,"
Oxford University Press, number 9780195315035.
- Robert E. Hall & Charles I. Jones, 1999.
"Why Do Some Countries Produce So Much More Output per Worker than Others?,"
NBER Working Papers
6564, National Bureau of Economic Research, Inc.
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
- Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
- Serena Ng & Pierre Perron, 1997.
"Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power,"
Boston College Working Papers in Economics
369, Boston College Department of Economics, revised 01 Sep 2000.
- Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
- Arvind Virmani, 2006. "India's Economic Growth History: Fluctuations, Trends, Break Points and Phases," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 41(1), pages 81-103, July.
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Orazio P. Attanasio & Lucio Picci & Antonello E. Scorcu, 2000. "Saving, Growth, and Investment: A Macroeconomic Analysis Using a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 182-211, May.
- Hoeffler, Anke E, 2002.
" The Augmented Solow Model and the African Growth Debate,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 64(2), pages 135-58, May.
- Anke E. Hoeffler, 2000. "The Augmented Solow Model and the African Growth Debate," CID Working Papers 36, Center for International Development at Harvard University.
- Brito, Paulo M. B. & Pereira, Alfredo M., 2002. "Housing and Endogenous Long-Term Growth," Journal of Urban Economics, Elsevier, vol. 51(2), pages 246-271, March.
- Kevin S. Nell, 2013. "An alternative explanation of India's growth transition: a demand-side hypothesis," Cambridge Journal of Economics, Oxford University Press, vol. 37(1), pages 113-141.
- Kevin S. Nell, 2012. "Demand-led versus supply-led growth transitions," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 34(4), pages 713-748, July.
- J. Bradford DeLong & Lawrence H. Summers, 1992. "Equipment Investment and Economic Growth: How Strong Is the Nexus?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 157-212.
- Jushan Bai & Pierre Perron, 2003.
"Computation and analysis of multiple structural change models,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
- Tom Doan, . "RATS programs to replicate examples of Bai-Perron procedure," Statistical Software Components RTZ00008, Boston College Department of Economics.
- Tom Doan, . "BAIPERRON: RATS procedure to perform Bai-Perron Test for Multiple Structural Changes," Statistical Software Components RTS00013, Boston College Department of Economics.
- Tom Doan, . "MULTIPLEBREAKS: RATS procedure to perform multiple structural change analysis," Statistical Software Components RTS00138, Boston College Department of Economics.
- BAI, Jushan & PERRON, Pierre, 1998. "Computation and Analysis of Multiple Structural-Change Models," Cahiers de recherche 9807, Universite de Montreal, Departement de sciences economiques.
- Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Bonanca).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.