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India's Mysterious Manufacturing Miracle

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  • Pete Klenow

    (Stanford University)

  • Gunjan Sharma

    (University of Missouri)

  • Albert Bollard

    (Stanford University)

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    Abstract

    Using data on formal manufacturing plants in India, we report a large but imprecise acceleration in productivity growth starting around the mid-1990s (e.g., 1993-2004 compared to 1980-1992). We trace the acceleration to productivity growth within large plants (200 workers or more), as opposed to reallocation across such plants. As many economists believe Indian reforms during this era improved resource allocation, the absence of a growth pickup from reallocation is surprising. Moreover, when we look across industries we fail to robustly relate productivity growth to prominent reforms such as industrial de-licensing, tariff reductions, FDI liberalization, or lifting of small-scale industry reservations. Even under a generous reading of their effects, these reforms (at least as we measure them) seem to account for less than one-quarter of overall productivity growth.

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    Bibliographic Info

    Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1176.

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    Date of creation: 2011
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    Handle: RePEc:red:sed011:1176

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    1. Panagariya, Arvind, 2011. "India: The Emerging Giant," OUP Catalogue, Oxford University Press, number 9780199751563, September.
    2. Ariel Burstein & Andrew Atkeson, 2009. "Innovation, Firm Dynamics, and International Trade," 2009 Meeting Papers 186, Society for Economic Dynamics.
    3. Laura Alfaro & Anusha Chari, 2009. "India Transformed? Insights from the Firm Level 1988-2005," Harvard Business School Working Papers 10-030, Harvard Business School.
    4. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    5. Susanto Basu & Luigi Pascali & Fabio Schiantarelli & Luis Serven, 2009. "Productivity, Welfare and Reallocation: Theory and Firm-Level Evidence," NBER Working Papers 15579, National Bureau of Economic Research, Inc.
    6. Bulent Unel, 2003. "Productivity Trends in India's Manufacturing Sectors in the Last Two Decades," IMF Working Papers 03/22, International Monetary Fund.
    7. Gunjan Sharma, 2006. "Competing or Collaborating Siblings? Industrial and Trade Policies in India," Working Papers 0610, Department of Economics, University of Missouri.
    8. Jagadeesh Sivadasan, 2009. "Barriers to Competition and Productivity: Evidence from India," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 42.
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