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The Impact of Policy Reforms on Labour Productivity, Price Cost Margin and Total Factor Productivity: The Nepalese Experience

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  • Kishor Sharma

    (School of Management Charles Sturt University Wagga Wagga, NSW 2650, Australia)

Abstract

Using data from the Nepalese manufacturing sector, this article examines whether the policy reforms improve efficiency (productivity) and benefit the poor in least developed countries (LDCs) with weak institutions and poor physical infrastruc ture. Results indicate some improvements in all indicators of productivity following policy reforms, but the Nepalese manufacturing sector remains fragile due to rigidity in the factor market. Our analysis suggests that despite an increase in labour productivity, increased proportion of manufacturing value added has not been passed on to workers, indicating that the poor have not benefited much from the reform process. Total Factor Productivity (TFP) continued to decline even after the reforms, but at a lower rate. There is an urgent need to introduce further reforms in the labour market and the infrastructure sector. The econometric evidence suggests higher productivity growth in those industries which are able to produce on a large scale, have higher protection and semi-skilled workforce, but lower capital intensity and no public sector domination.

Suggested Citation

  • Kishor Sharma, 2004. "The Impact of Policy Reforms on Labour Productivity, Price Cost Margin and Total Factor Productivity: The Nepalese Experience," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 5(1), pages 55-68, March.
    • Handle: RePEc:sae:soueco:v:5:y:2004:i:1:p:55-68
    DOI: 10.1177/139156140400500103
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    References listed on IDEAS

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    1. Norsworthy, J R & Malmquist, David H, 1983. "Input Measurement and Productivity Growth in Japanese and U.S. Manufacturing," American Economic Review, American Economic Association, vol. 73(5), pages 947-967, December.
    2. Kishor Sharma & Sisira Jayasuriya & Edward Oczkowski, 2000. "Liberalization and Productivity Growth: The Case of Manufacturing Industry in Nepal," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 205-222.
    3. Nishimizu, Mieko & Robinson, Sherman, 1984. "Trade policies and productivity change in semi-industrialized countries," Journal of Development Economics, Elsevier, vol. 16(1-2), pages 177-206.
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    5. Okuda, Satoru, 1994. "Taiwan's trade and FDI policies and their effect on productivity growth," The Developing Economies, Institute of Developing Economies, Japan External Trade Organization(JETRO), vol. 32(4), pages 423-443, December.
    6. Nelson, Richard R, 1981. "Research on Productivity Growth and Productivity Differences: Dead Ends and New Departures," Journal of Economic Literature, American Economic Association, vol. 19(3), pages 1029-1064, September.
    7. Nadiri, M Ishaq, 1970. "Some Approaches to the Theory and Measurement of Total Factor Productivity: A Survey," Journal of Economic Literature, American Economic Association, vol. 8(4), pages 1137-1177, December.
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    Cited by:

    1. Prema-chandra Athukorala & Kishor Sharma, 2004. "Foreign Investment in a Least Developed Country: The Nepalese Experience," ASARC Working Papers 2004-05, The Australian National University, Australia South Asia Research Centre.
    2. Kishor Sharma, 2005. "Trade Policy, Poverty and Inequity in Nepal," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 6(2), pages 241-250, September.
    3. Edward Oczkowski & Kishor Sharma, 2005. "Determinants of Efficiency in Least Developed Countries: Further Evidence from Nepalese Manufacturing Firms," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 617-630.

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    More about this item

    Keywords

    (JEL: E13; F43; 041) Keywords: Liberalization; Total Factor Productivity Growth; Labour Productivity; Nepal.;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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