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Economic Reform and Productivity growth in Indian Manufacturing Industries: An interaction of technical change and scale economies

Author

Listed:
  • Sanja S. Pattnayak

    () (National University of Singapore)

  • Thangavelu, S. M.

    () (National University of Singapore)

Abstract

This paper studies the effects of the key economic reforms of 1991 on the Indian manufacturing industries using a panel of manufacturing industries. A Translog cost function is used to analyze the production structure in terms of biased technical change and economies of scale. A panel consisting of 121 Indian manufacturing industries from 1982 to 1998 was used in our estimation. The results of our paper support the evidence that there are economies of scale (only moderate) in the Indian manufacturing industries and it has been exploited after the key economic reforms in 1991. Most of the industries in our study revealed bias technology change and majority of the industries have experienced capital-using technical change. This suggests that the key economic reforms of liberalizing the capacity licensing regime that allows greater investment in capital goods will have a positive impact on productive performance of the industries if the price of capital does not substantially increase after the economic reforms. We observe TFP improvements for most of the industries after the 1991 reform initiatives, which support the evidence of improvements in economic efficiency after the key reform initiatives of the 1991.

Suggested Citation

  • Sanja S. Pattnayak & Thangavelu, S. M., 2003. "Economic Reform and Productivity growth in Indian Manufacturing Industries: An interaction of technical change and scale economies," Departmental Working Papers wp0307, National University of Singapore, Department of Economics.
  • Handle: RePEc:nus:nusewp:wp0307
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    File URL: http://www.fas.nus.edu.sg/ecs/pub/wp/wp0307.pdf
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    References listed on IDEAS

    as
    1. Charles R. Hulten & Sylaja Srinivasan, 1999. "Indian Manufacturing Industry: Elephant or Tiger? New Evidence on the Asian Miracle," NBER Working Papers 7441, National Bureau of Economic Research, Inc.
    2. N. Jayaram & Surendra K. Gupta & A.P. Barnabas & Sachchidananda & P.S. Pachauri & M.L. Khattar & B.N. Sampath & H. R. Khanna, 1985. "India," India Quarterly: A Journal of International Affairs, , vol. 41(1), pages 177-179, January.
    3. Christensen, Laurits R & Greene, William H, 1976. "Economies of Scale in U.S. Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 655-676, August.
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    Cited by:

    1. Ali, Jabir, 2007. "Productivity and Efficiency in Indian Meat Processing Industry: A DEA Approach," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 62(4).
    2. Rajesh Natarajan & Malathy Duraisamy, 2008. "Efficiency and productivity in the Indian unorganized manufacturing sector: did reforms matter?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 55(4), pages 373-399, December.

    More about this item

    Keywords

    Total Factor Productivity; Bias Technical Change; Economies of Scale; Economic Reforms;

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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