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Globalization and Structural Changes in the Indian Industrial Sector: An Analysis of Production Functions

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  • Mishra, SK

Abstract

In 1991 India chose to open her economy and formulated the New Economic Policy (NEP). Under the structural adjustment and reform programmes, the NEP aimed at promoting growth by eliminating supply bottlenecks that hinder competitiveness, efficiency and dynamism in the economic system This study investigates into the structural changes in the manufacturing sector of India brought about by liberalization and globalization of the economy. Structural changes in terms of employment of labour and capital, indicated by replacement of the former by the latter, and changes in returns-to-scale have been examined by estimating CES, Zellner-Revankar, Transcendental and Diewert production functions. State-wise data for 1990-91 and 2003-04 have been analyzed. The findings have indicated that the rise in industrial output during the reference period is accountable to substitution of capital for labour in almost all states. In the pre-globalization period the industries experienced increasing returns to scale. Globalization has given way to diminishing returns to scale. Along with a rise in industrial output, globalization has led to a decline in regional disparities in terms of population-deflated indices of employment of manpower and capital, and the resultant output.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1231.

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Date of creation: 20 Dec 2006
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Handle: RePEc:pra:mprapa:1231

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Keywords: India; Manufacturing sector; industry; globalization; liberalization; production function; returns to scale; substitution; labour; capital; Zellner-Revankar; CES; Transcendental; Diewert; nonlinear; optimization; Differential evolution; LAD; Least Absolute Deviation estimation;

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  1. Kaliappa Kalirajan & Shashanka Bhide, 2004. "The Post-reform Performance of the Manufacturing Sector in India," Asian Economic Papers, MIT Press, MIT Press, vol. 3(2), pages 126-157.
  2. Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(2), pages 612-645, May.
  3. Dasgupta, Madhuchhanda & Mishra, SK, 2004. "Least absolute deviation estimation of linear econometric models: A literature review," MPRA Paper 1781, University Library of Munich, Germany.
  4. Mishra, SK, 2006. "Global Optimization by Differential Evolution and Particle Swarm Methods: Evaluation on Some Benchmark Functions," MPRA Paper 1005, University Library of Munich, Germany.
  5. Sankar, Ulaganathan, 1970. "Elasticities of Substitution and Returns to Scale in Indian Manufacturing Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(3), pages 399-411, October.
  6. Williams, Martin & Laumas, Prem S, 1984. "Economies of Scale for Various Types of Manufacturing Production Technologies in an Underdeveloped Economy," Economic Development and Cultural Change, University of Chicago Press, vol. 32(2), pages 401-12, January.
  7. SK Mishra, 2007. "Estimation of Zellner-Revankar Production Function Revisited," Economics Bulletin, AccessEcon, vol. 3(14), pages 1-7.
  8. Shaikh, Anwar, 1974. "Laws of Production and Laws of Algebra: The Humbug Production Function," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 115-20, February.
  9. Satish Chand & Kunal Sen, 1996. "Trade Liberalization and Productivity Growth: Evidence from Indian Manufacturing," Departmental Working Papers, The Australian National University, Arndt-Corden Department of Economics 1996-11, The Australian National University, Arndt-Corden Department of Economics.
  10. Nigel L. Driffield & Uma S. Kambhampati, 2003. "Trade Liberalization and the Efficiency of Firms in Indian Manufacturing," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 7(3), pages 419-430, 08.
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