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Firm Dynamics and Productivity Growth in Indian Manufacturing: Evidence from Plant Level Panel Dataset

  • Aradhna Aggarwal

    (RIEB, Kobe University (Japan) and Department of Business Economics, University of Delhi (India))

  • Takahiro Sato

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

This paper examines the effects of firms dynamics on industry level productivity growth in India during the period 2000-01 to 2005-06 using plant level panel data of 22 manufacturing industries. The empirical analysis is based on decomposition techniques of aggregate productivity growth. The analysis is confined to large sector plants. Results suggest that the contribution of entry of new plants to aggregate productivity growth is positive in most industries. While newly established plants have rather small entry effect, small plants that grow and enter the large size class have substantial effects on industry level productivity growth. In low tech matured industries entry effects are supported by the productivity growth of the continuing firms. In medium tech industries entry effects are modest; productivity growth of the continuing firms is supported by reallocation effects. In high tech industries all the three effects seem to reinforce productivity growth.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2011-07.pdf
File Function: First version, 2011
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Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2011-07.

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Length: 58 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:kob:dpaper:dp2011-07
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