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Productivity Dynamics and Rural Industrialization in India

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  • Takahiro Sato
  • Aradhna Aggarwal

Abstract

Since the late 1990s, industrialization in India has been driven by the rural organized manufacturing sector. This paper examines the effects of firms’ dynamics on rural industrialization in India, using plant-level panel data, to investigate the characteristics of rural industrialization in India in recent years. In particular, the paper focuses on productivity differences among continuing, entering, and exiting firms. The results show that both labour and total factor productivity of the organized manufacturing sector in rural areas increased during 2000–2006 and the aggregate productivity growth is supported by the productivity growth of the continuing firms, the entry of productive firms, and the exit of less-productive firms. The paper can conclude that firms’ productivity dynamics contributed to the current rural industrialization in India. JEL: O14, O47, O53

Suggested Citation

  • Takahiro Sato & Aradhna Aggarwal, 2020. "Productivity Dynamics and Rural Industrialization in India," Journal of Interdisciplinary Economics, , vol. 32(1), pages 23-46, January.
    • Handle: RePEc:sae:jinter:v:32:y:2020:i:1:p:23-46
    DOI: 10.1177/0260107919875585
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    References listed on IDEAS

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    1. Atsuko Kamiike & Takahiro Sato & Aradhna Aggarwal, 2011. "Productivity Dynamics in the Indian Pharmaceutical Industry: Evidences from Plant-level Panel Data," Working Papers id:4445, eSocialSciences.
    2. John Baldwin & Wulong Gu, 2003. "Export-market participation and productivity performance in Canadian manufacturing," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 634-657, August.
    3. Baldwin, John R. Gu, Wulong, 2003. "Participation in Export Markets and Productivity Performance in Canadian Manufacturing," Economic Analysis (EA) Research Paper Series 2003011e, Statistics Canada, Analytical Studies Branch.
    4. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    5. Aradhna Aggarwal & Takahiro Sato, 2011. "Firm Dynamics and Productivity Growth in Indian Manufacturing: Evidence from Plant Level Panel Dataset," Discussion Paper Series DP2011-07, Research Institute for Economics & Business Administration, Kobe University.
    6. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    7. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    India; rural industrialization; total factor productivity;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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