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The Cost Competitiveness of Manufacturing in China and India: An Industry and Regional Perspective


  • Bart Van Ark

    (Indian Council for Research on International Economic Rela)

  • Abdul Azeez

    (Indian Council for Research on International Economic Rela)

  • Erumban Vivian Chen

    (Indian Council for Research on International Economic Rela)

  • Chen Utsav Kumar

    (Indian Council for Research on International Economic Rela)


This paper focuses on comparisons of productivity, (unit) labor cost and industry-level competitiveness for the manufacturing sector of China and India. We first provide a comparison between India and China using a broad international perspective. We find that China has increased its labor productivity to a level above that of India, but due to a somewhat higher compensation level, China is still somewhat at a disadvantage in terms of unit labor cost in manufacturing relative to India. In the second half of the paper, we make an analysis of industry level differences in productivity, labor compensation and unit labor costs at state and province level in the two countries from the mid 1990s to the early 2000s. We find rapid declines in unit labor cost across industries and provinces in China, but increases in many instances in India. This suggest that productivity and compensation growth have become much more aligned across regions in China whereas this is not (yet) the case in India. We relate these results to differences in the implementation of market reforms between the two countries and removal of barriers to resource mobility eradicating inefficient manufacturing activity

Suggested Citation

  • Bart Van Ark & Abdul Azeez & Erumban Vivian Chen & Chen Utsav Kumar, "undated". "The Cost Competitiveness of Manufacturing in China and India: An Industry and Regional Perspective," Indian Council for Research on International Economic Relations, New Delhi Working Papers 228, Indian Council for Research on International Economic Relations, New Delhi, India.
  • Handle: RePEc:ind:icrier:228

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    References listed on IDEAS

    1. Alex M. Mutebi, 2007. "Regulatory Responses to Large-format Transnational Retail in South-east Asian Cities," Urban Studies, Urban Studies Journal Limited, vol. 44(2), pages 357-379, February.
    2. AfDB AfDB, . "AfDB Group Annual Report 2005," Annual Report, African Development Bank, number 61 edited by Koua Louis Kouakou.
    3. Berdegue, Julio A. & Balsevich, Fernando & Flores, Luis & Reardon, Thomas, 2005. "Central American supermarkets' private standards of quality and safety in procurement of fresh fruits and vegetables," Food Policy, Elsevier, vol. 30(3), pages 254-269, June.
    4. Thomas Reardon & Spencer Henson & Julio Berdegué, 2007. "'Proactive fast-tracking' diffusion of supermarkets in developing countries: implications for market institutions and trade," Journal of Economic Geography, Oxford University Press, vol. 7(4), pages 399-431, July.
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    More about this item


    O14; J24;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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