IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v20y2009i4p754-766.html
   My bibliography  Save this article

Manufacturing productivity in China and India: The role of institutional changes

Author

Listed:
  • Pandey, Manish
  • Dong, Xiao-yuan

Abstract

In this paper we undertake a comparative study of productivity in the manufacturing sector for China and India using data from survey of manufacturing industries for the two countries. We find that productivity of manufacturing industries in China relative to that in India improved substantially over the 1998-2003 period. Specifically, the average total factor productivity (TFP) growth for the manufacturing sector over this period was about 11% higher in China than in India. We document two substantial changes in government policies in China that were not witnessed in India. First, the late 1990s saw an enormous wave of ownership restructuring due to the formal endorsement of private property rights by the Chinese central government. Second, in 1997 a large scale labour retrenchment program was launched to address the long standing problem of labour redundancy in the public sector. Using data from the Chinese survey of manufacturing industries, we quantify the impact of these large scale institutional changes on TFP of Chinese manufacturing industries. We find that these policy changes can explain about 30% of the growth in TFP of manufacturing industries. Hence we conclude that these institutional changes in China can account for a significant part of the gains in productivity of manufacturing industries in China relative to that in India over the 1998-2003 period.

Suggested Citation

  • Pandey, Manish & Dong, Xiao-yuan, 2009. "Manufacturing productivity in China and India: The role of institutional changes," China Economic Review, Elsevier, vol. 20(4), pages 754-766, December.
    • Handle: RePEc:eee:chieco:v:20:y:2009:i:4:p:754-766
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043-951X(09)00047-9
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kochhar, Kalpana & Kumar, Utsav & Rajan, Raghuram & Subramanian, Arvind & Tokatlidis, Ioannis, 2006. "India's pattern of development: What happened, what follows?," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 981-1019, July.
    2. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 91-134.
    3. Lee, Boon L. & Rao, D.S. Prasada & Shepherd, William, 2007. "Comparisons of real output and productivity of Chinese and Indian manufacturing, 1980-2002," Journal of Development Economics, Elsevier, vol. 84(1), pages 378-416, September.
    4. Vijay Joshi, 1998. "India's economic reforms: Progress, problems, prospects," Oxford Development Studies, Taylor & Francis Journals, vol. 26(3), pages 333-350.
    5. Elena Podrecca & Gaetano Carmeci, 2001. "Fixed investment and economic growth: new results on causality," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 177-182.
    6. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
    7. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    8. Louis Kuijs & Tao Wang, 2006. "China's Pattern of Growth: Moving to Sustainability and Reducing Inequality," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(1), pages 1-14, February.
    9. Li, Hongbin & Rozelle, Scott, 2004. "Insider privatization with a tail: the screening contract and performance of privatized firms in rural China," Journal of Development Economics, Elsevier, vol. 75(1), pages 1-26, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sai Ding & Alessandra Guariglia & Richard Harris, 2016. "The determinants of productivity in Chinese large and medium-sized industrial firms, 1998–2007," Journal of Productivity Analysis, Springer, vol. 45(2), pages 131-155, April.
    2. Wei Li & Taye Mengistae & Lixin Colin Xu, 2011. "Diagnosing Development Bottlenecks: China and India," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73, pages 722-752, December.
    3. Du, Yuxin & Teixeira, Aurora A.C., 2012. "A bibliometric account of Chinese economics research through the lens of the China Economic Review," China Economic Review, Elsevier, vol. 23(4), pages 743-762.
    4. Acharya, Hem, 2013. "Employment Growth by Accelerated Manufacturing in India- A Comparative Study and Lessons to Be Learnt from China," MPRA Paper 46697, University Library of Munich, Germany.
    5. Yimin Zhang & Tianmu Wang, 2010. "Profitability and Productivity of the Chinese Textile Industry," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(5), pages 1-21, September.
    6. Yi Jiang & Xiaoting Zheng, 2014. "Private Sector Participation and Performance of Urban Water Utilities in China," Economic Development and Cultural Change, University of Chicago Press, vol. 63(1), pages 155-189.
    7. Hehe Liu & Tianyu Yang, 2015. "Explaining the Productivity Growth Gap Between China and India: The Role of Structural Transformation," The Developing Economies, Institute of Developing Economies, vol. 53(2), pages 100-121, June.
    8. Sangaralingam Ramesh, 2020. "Entrepreneurship in China and India," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(1), pages 321-355, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Castelló-Climent, Amparo & Mukhopadhyay, Abhiroop, 2013. "Mass education or a minority well educated elite in the process of growth: The case of India," Journal of Development Economics, Elsevier, vol. 105(C), pages 303-320.
    2. Amparo Castello-Climent & Abhiroop Mukhopadhyay, 2010. "Mass education or a minority well educated elite in the process of development: The case of India," Discussion Papers 10-08, Indian Statistical Institute, Delhi.
    3. Purna Banerjee & C. Veeramani, 2019. "Export competitiveness, labour laws, and gender differences in job dynamics: Analysis of manufacturing industries across Indian States," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-035, Indira Gandhi Institute of Development Research, Mumbai, India.
    4. Amin, Mohammad & Mattoo, Aaditya, 2008. "Human capital and the changing structure of the Indian economy," Policy Research Working Paper Series 4576, The World Bank.
    5. Gupta, Abhay, 2009. "Pre-reform Conditions, Intermediate Inputs and Distortions: Solving the Indian Growth Puzzle," MPRA Paper 14481, University Library of Munich, Germany.
    6. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    7. repec:kqi:journl:2018-2-1-2 is not listed on IDEAS
    8. Veeramani, Choorikkad & Banerjee, Purna, 2022. "Exchange rate fluctuations, labour laws, and gender differences in job flows: Analysis of manufacturing industries across Indian states," World Development, Elsevier, vol. 152(C).
    9. Albert Berry, 2018. "India’s 1970s-1990s Step-wise Growth Acceleration: Causes and Impacts," Journal of Development Innovations, KarmaQuest International, vol. 2(1), pages 14-38, May.
    10. Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2016. "Highway to Success: The Impact of the Golden Quadrilateral Project for the Location and Performance of Indian Manufacturing," Economic Journal, Royal Economic Society, vol. 126(591), pages 317-357, March.
    11. Kwan, Fung & Zhang, Yang & Zhuo, Shuaihe, 2018. "Labour reallocation, productivity growth and dualism: The case of China," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 198-210.
    12. Dalila Nicet-Chenaf & Eric Rougier, 2009. "Human capital and structural change: how do they interact with each other in growth?," Post-Print hal-00389040, HAL.
    13. Krishna Chaitanya Vadlamannati & Artur Tamazian, 2017. "Are Left-Wing Governments Really Pro-Labor? An Empirical Investigation for Latin America," Kyklos, Wiley Blackwell, vol. 70(1), pages 129-160, February.
    14. Celine Bonnefond, 2014. "Growth Dynamics And Conditional Convergence Among Chinese Provinces: A Panel Data Investigation Using System Gmm Estimator," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(4), pages 1-25, December.
    15. Jochen Hartwig, 2009. "A panel Granger-causality test of endogenous vs. exogenous growth," KOF Working papers 09-231, KOF Swiss Economic Institute, ETH Zurich.
    16. de Vries, Gaaitzen J. & Erumban, Abdul A. & Timmer, Marcel P. & Voskoboynikov, Ilya & Wu, Harry X., 2012. "Deconstructing the BRICs: Structural transformation and aggregate productivity growth," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 211-227.
    17. Singh, Nirvikar, 2008. "India’s Development Strategy: Accidents, Design and Replicability," MPRA Paper 12453, University Library of Munich, Germany.
    18. Longfeng Ye & Peter E. Robertson, 2017. "Migration and Growth in China: A Sceptical Assessment of the Evidence," Economics Discussion / Working Papers 17-03, The University of Western Australia, Department of Economics.
    19. Amartya Lahiri & Kei-Mu Yi, 2009. "A Tale of Two States: Maharashtra and West Bengal," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 523-542, July.
    20. Baiardi, Donatella & Bianchi, Carluccio & Lorenzini, Eleonora, 2015. "The price and income elasticities of the top clothing exporters: Evidence from a panel data analysis," Journal of Asian Economics, Elsevier, vol. 38(C), pages 14-30.
    21. Dibyendu Maiti & Sugata Marjit, 2009. "Regional Openness, Income Growth And Disparity Across Major Indian States During 1980-2004," Development Economics Working Papers 22927, East Asian Bureau of Economic Research.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:20:y:2009:i:4:p:754-766. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.