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Back on the Rails -- Competition and Productivity in State-owned Industry

Author

Listed:
  • Rohini Somanathan

    (Department of Economics, Delhi School of Economics, Delhi, India)

  • Kala Krishna

    (Department of Economics, Pennsylvania State University)

  • Sergey Lychagin

    (Department of Economics, Pennsylvania State University)

  • Sanghamitra Das

Abstract

The importance of Total Factor Productivity (TFP) in explaining output changes is widely accepted, yet its sources are not well understood. We use a proprietary data set on the oor-level operations at the Bhilai Rail and Structural Mill (RSM) in India to understand the determinants of changes in plant productivity between January 2000 and March 2003. During this period there was a 35% increase in output with minimal changes in the stock of physical capital or the number of employees, but sizable reductions in the number and duration of various types of production delays. We model interruptions to the production process as a function of worker characteristics and find that a large part of the avoidable delay reductions are attributable to training. Overall, changes in all delays account for over half the changes in productivity. Our results provide some explanation for the large within-industry di erences in productivity observed in developing countries and also suggest that speci c knowledge-enhancing investments can have very high returns. Our approach also provides an example of how detailed data on production processes can be fruitfully used to better understand TFP changes, which have typically been treated as residuals in growth-accounting exercises.

Suggested Citation

  • Rohini Somanathan & Kala Krishna & Sergey Lychagin & Sanghamitra Das, 2010. "Back on the Rails -- Competition and Productivity in State-owned Industry," Working papers 184, Centre for Development Economics, Delhi School of Economics.
  • Handle: RePEc:cde:cdewps:184
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    References listed on IDEAS

    as
    1. Sanghamitra Das & Kala Krishna & Sergey Lychagin & Rohini Somanathan, 2013. "Back on the Rails: Competition and Productivity in State-Owned Industry," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 136-162, January.
    2. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    3. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, May.
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    6. Timothy Dunne & Shawn Klimek & James Schmitz, Jr., 2010. "Competition and Productivity: Evidence from the Post WWII U.S. Cement Industry," Working Papers 10-29, Center for Economic Studies, U.S. Census Bureau.
    7. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1351-1408.
    8. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    9. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    10. Tybout, James & de Melo, Jamie & Corbo, Vittorio, 1991. "The effects of trade reforms on scale and technical efficiency : New evidence from Chile," Journal of International Economics, Elsevier, vol. 31(3-4), pages 231-250, November.
    11. Nicholas Bloom & Aprajit Mahajan & David McKenzie & John Roberts, 2010. "Why Do Firms in Developing Countries Have Low Productivity?," American Economic Review, American Economic Association, vol. 100(2), pages 619-623, May.
    12. Bridgman, Benjamin & Gomes, Victor & Teixeira, Arilton, 2011. "Threatening to Increase Productivity: Evidence from Brazil's Oil Industry," World Development, Elsevier, vol. 39(8), pages 1372-1385, August.
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    Citations

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    Cited by:

    1. Sanghamitra Das & Kala Krishna & Sergey Lychagin & Rohini Somanathan, 2013. "Back on the Rails: Competition and Productivity in State-Owned Industry," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 136-162, January.
    2. Steven D. Levitt & John A. List & Chad Syverson, 2013. "Toward an Understanding of Learning by Doing: Evidence from an Automobile Assembly Plant," Journal of Political Economy, University of Chicago Press, vol. 121(4), pages 643-681.
    3. E. Somanathan & Rohini Somanathan & Anant Sudarsan & Meenu Tewari, 2014. "The Impact of Temperature on Productivity and Labor Supply: Evidence from Indian Manufacturing," Working Papers id:6308, eSocialSciences.
    4. Andreas Menzel, 2017. "Knowledge Exchange and Productivity Spill-overs in Bangladeshi Garment Factories," CERGE-EI Working Papers wp607, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    5. Ana Cecília Fieler & Marcela Eslava & Daniel Xu, 2014. "Trade, Skills, and Quality Upgrading: A Theory with Evidence from Colombia," NBER Working Papers 19992, National Bureau of Economic Research, Inc.
    6. Peter Slade & Getu Hailu, 2016. "Efficiency and regulation: a comparison of dairy farms in Ontario and New York State," Journal of Productivity Analysis, Springer, vol. 45(1), pages 103-115, February.

    More about this item

    Keywords

    Total Factor Productivity (TFP); Plant level data; Competitiveness and trade.;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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