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

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Mishra, SK

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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, Diewert and Bruno's 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. The elasticity of substitution has declined for most of the 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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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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Related research
Keywords: India Manufacturing sector industry globalization liberalization production function returns to scale variable elasticity of substitution Bruno's production function labour capital Zellner-Revankar CES VES CMS Transcendental Diewert nonlinear optimization Differential evolution LAD Least Absolute Deviation estimation

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Find related papers by JEL classification:
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models

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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.:
  1. Diewert, W E, 1971. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 481-507, May-June. [Downloadable!] (restricted)
  2. SK Mishra, 2007. "Estimation of Zellner-Revankar Production Function Revisited," Economics Bulletin, Economics Bulletin, vol. 3(14), pages 1-7. [Downloadable!]
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  3. 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. [Downloadable!]
  4. Nigel L. Driffield & Uma S. Kambhampati, 2003. "Trade Liberalization and the Efficiency of Firms in Indian Manufacturing," Review of Development Economics, Blackwell Publishing, vol. 7(3), pages 419-430, 08. [Downloadable!] (restricted)
  5. Kaliappa Kalirajan & Shashanka Bhide, 2004. "The Post-reform Performance of the Manufacturing Sector in India," Asian Economic Papers, MIT Press, vol. 3(2), pages 126-157. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. 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.
  8. Dasgupta, Madhuchhanda & Mishra, SK, 2004. "Least absolute deviation estimation of linear econometric models: A literature review," MPRA Paper 1781, University Library of Munich, Germany. [Downloadable!]
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