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Is industry still the engine of growth? An econometric study of the organized sector employment in India

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  • Chakravarty, Sangeeta
  • Mitra, Arup

Abstract

This paper in an attempt to examine if the manufacturing sector is still the engine of growth delineates the inter-connections among several activities based on time series data on employment in different components of the organized sector in India. The analysis is pursued in the vector auto-regression (VAR) framework taking into account the results of variance decomposition analysis and the impulse response function. The findings suggest that some of the activities are growing independent of the manufacturing sector. Nevertheless manufacturing, construction and community, social and personal services are the most important drivers. Finally, the paper predicts the informal sector employment based on the magnitude of employment in different components of the organized or formal sector. Given the narrow margin of error of forecast the paper argues that in the absence of time series information on total employment, the time series on organized sector employment can be used for necessary predictions and planning required for employment and poverty.

Suggested Citation

  • Chakravarty, Sangeeta & Mitra, Arup, 2009. "Is industry still the engine of growth? An econometric study of the organized sector employment in India," Journal of Policy Modeling, Elsevier, vol. 31(1), pages 22-35.
  • Handle: RePEc:eee:jpolmo:v:31:y:2009:i:1:p:22-35
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    References listed on IDEAS

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    1. Bussolo, Maurizio & Mizala, Alejandra & Romaguera, Pilar, 2002. "Beyond Heckscher-Ohlin: trade and labour market interactions in a case study for Chile," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 639-666, November.
    2. Milas, Costas, 1999. "Labor Market Decisions and Greek Manufacturing Competitiveness," Journal of Policy Modeling, Elsevier, vol. 21(4), pages 505-513, July.
    3. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    4. Robert B. Litterman, 1979. "Techniques of forecasting using vector autoregressions," Working Papers 115, Federal Reserve Bank of Minneapolis.
    5. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
    6. McKinnon, Ronald & Schnabl, Gunther, 2006. "Devaluing the dollar: A critical analysis of William Cline's case for a New Plaza Agreement," Journal of Policy Modeling, Elsevier, vol. 28(6), pages 683-694, September.
    7. Stiglitz, Joseph E., 2003. "Globalization and growth in emerging markets and the New Economy," Journal of Policy Modeling, Elsevier, vol. 25(5), pages 505-524, July.
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    Citations

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    Cited by:

    1. Lavopa, Alejandro & Szirmai, Adam, 2012. "Industrialization, employment and poverty," MERIT Working Papers 081, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Alex Coad & Antonio Vezzani, 2017. "Manufacturing the future: is the manufacturing sector a driver of R&D, exports and productivity growth?," JRC Working Papers on Corporate R&D and Innovation 2017-06, Joint Research Centre (Seville site).
    3. Szirmai, Adam, 2012. "Industrialisation as an engine of growth in developing countries, 1950–2005," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 406-420.
    4. Murat Arsel & Servaas Storm, 2015. "Forum 2015," Development and Change, International Institute of Social Studies, vol. 46(4), pages 666-699, July.
    5. ., 2013. "Explaining Success and Failure in Economic Development," Chapters,in: World Economic Performance, chapter 9, pages 227-267 Edward Elgar Publishing.
    6. Szirmai, Adam & Verspagen, Bart, 2015. "Manufacturing and economic growth in developing countries, 1950–2005," Structural Change and Economic Dynamics, Elsevier, vol. 34(C), pages 46-59.
    7. Pal, Rupayan & Rathore, Udayan, 2016. "Estimating workers’ bargaining power and firms’ markup in India: Implications of reforms and labour regulations," Journal of Policy Modeling, Elsevier, vol. 38(6), pages 1118-1135.
    8. Mohammad Ahmar Uddin & Syed Ahsan Jamil & Khaliquzzaman Khan, 2016. "Private Equity and its Role in the Development of the Indian Manufacturing Sector," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 361-364.
    9. Haraguchi, Nobuya & Cheng, Charles Fang Chin & Smeets, Eveline, 2017. "The Importance of Manufacturing in Economic Development: Has This Changed?," World Development, Elsevier, vol. 93(C), pages 293-315.

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