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Output and Labor Market in Organised Manufacturing: A Panel Cointegration Analysis for India

Author

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  • Mita Bhattacharya
  • Paresh Kumar Narayan

Abstract

One of the policy puzzles faced in India during the last two and half decades has been the weak association between output and employment growth, particularly in the manufacturing sector. In this paper, we investigate the long-run relationship among output (measured in value added), wages (measured in real term) and labor productivity in the case of organised sector in Indian manufacturing. Using panel data from 17 manufacturing industries at the two-digit level, we find that output-real wages-labor productivity series is panel co-integrated. For industry panels, real wages have an insignificant negative effect on output, while labor productivity has a significant positive effect. Our findings suggest that the implementation of policies particularly in improving labor productivity will have a direct effect in generating output and employment in this sector.

Suggested Citation

  • Mita Bhattacharya & Paresh Kumar Narayan, 2013. "Output and Labor Market in Organised Manufacturing: A Panel Cointegration Analysis for India," Monash Economics Working Papers 61-13, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2013-61
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2013/index.html
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    Cited by:

    1. Yeboah Asuamah, Samuel, 2016. "Modelling the effect of climate change and globalisation on the manufacturing sector of Ghana," MPRA Paper 70108, University Library of Munich, Germany.

    More about this item

    Keywords

    labor productivity; real wages; panel unit root tests; Indian manufacturing;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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