Technological Progress, Scale Effect and Total Factor Productivity Growth in Indian Cement Industry: Panel Estimation of Stochastic Production Frontier
AbstractThe economic policy reform in respect of Indian cement industry, during the early 80's, resulted in a phenomenal growth of this sector and the industry has, in fact, become the second largest in the world. However, this growth has been associated with a greater use of energy and other resources, resulting in severe environmental degradation. Further development of this industry, without increasing energy demand and thereby reducing emission and waste, would require increased productivity. This paper estimates Total Factor Productivity (TFP) growth in Indian cement industry during the period 1989-90 to 2006-07 using company level data and applying Stochastic Frontier Approach. TFP growth is decomposed into technical progress (TP), technical efficiency change (TEC) and changes in scale component (SC) with a view to gaining some insights into the sources of productivity growth of this industry in the post reform era. Empirical results show that TFP growth is mainly driven by SC and TP and not by TEC since TE is time invariant in nature. In the light of empirical results, the policy implication is that an industrial policy of exploiting the existing economies of scale is required to be implemented; and to boost the growth of this sector; priority should be given to enhance firms' capability of catching-up by adopting efficiency oriented action plan.
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 Institute for Social and Economic Change, Bangalore in its series Working Papers with number 216.
Length: 22 pages
Date of creation: 2009
Date of revision:
Cement Indistry; Economic Reforms;
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.:
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- Sangho Kim & Gwangho Han, 2001. "A Decomposition of Total Factor Productivity Growth in Korean Manufacturing Industries: A Stochastic Frontier Approach," Journal of Productivity Analysis, Springer, vol. 16(3), pages 269-281, November.
- Joyashree Roy & Jayant Sathaye & Alan Sanstad & Puran Mongia & Katja Schumacher, 1999. "Productivity Trends in India's Energy Intensive Industries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 33-61.
- Yang, Ming, 2006. "Energy efficiency policy impact in India: case study of investment in industrial energy efficiency," Energy Policy, Elsevier, vol. 34(17), pages 3104-3114, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (B B Chand).
If references are entirely missing, you can add them using this form.