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Impact of Infrastructure on Productivity: Case of Indian Registered Manufacturing


  • Deepika Goel

    (Ram Lal Anand College (Evening), Benito Juarez Road, New Delhi-110021, India)


This study is primarily focused on the productivity impacts of the provision of infrastructure on the registered manufacturing sector in India. This is analyzed by estimating the cost elasticity of infrastructure inputs. For this purpose we postulate a variable cost function model for the manufacturing sector with cost as a function of the prices of the variable inputs, level of output and infrastructure stocks. Variable inputs include capital, labour and intermediate input. Infrastructure is assumed to be a quasi-fixed input since its provision is done mainly by the public sector and it cannot be instantaneously adjusted in the short-run. The cost function model estimated consists of the variable translog cost function and the cost share equations for the variable inputs. We have used the time series data and it pertains for the period 1965-1999. Twenty -three infrastructure variables are used in this study which, are aggregated using the principal component methodology. Three alternate specifications of the quasi-fixed inputs are explored. The alternatives are economic infrastructure, social infrastructure and aggregate infrastructure. Estimated results suggest that infrastructure provision enhances the productivity in the manufacturing sector and it helps to lower the costs in the sector. Apart from this it also has several bias effects with respect to the variable inputs.

Suggested Citation

  • Deepika Goel, 2003. "Impact of Infrastructure on Productivity: Case of Indian Registered Manufacturing," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 38(1), pages 95-113, January.
  • Handle: RePEc:dse:indecr:v:38:y:2003:i:1:p:95-113

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    References listed on IDEAS

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    More about this item


    Infrastructure; Quasi-fixed; Translog; Productivity;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures


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