Economic Reform and Total Factor Productivity Growth in Indian Manufacturing Industries

Authors

  • Sangho Kim,

    1. Honam University, Korea
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  • Muthusamy Saravanakumar

    Corresponding author
    1. Sree Saraswathi Thyagaraja College (Autonomous), India
      Kim: Department of International Trade, Honam University, Gwangju 506-714, South Korea. Tel: +82-62-940-5394; Fax: +82-62-940-5116; E-mail: shkim@honam.ac.kr. Saravanakumar: Lecturer in Economics, Sree Saraswathi Thyagaraja College (Autonomous), Pollachi—642 107, Tamilnadu, India. E-mail: econsaravanan@yahoo.com
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Kim: Department of International Trade, Honam University, Gwangju 506-714, South Korea. Tel: +82-62-940-5394; Fax: +82-62-940-5116; E-mail: shkim@honam.ac.kr. Saravanakumar: Lecturer in Economics, Sree Saraswathi Thyagaraja College (Autonomous), Pollachi—642 107, Tamilnadu, India. E-mail: econsaravanan@yahoo.com

Abstract

A stochastic frontier production function model is applied to Indian manufacturing industries, to decompose the sources of total factor productivity growth into technical progress, technical efficiency, scale efficiency, and allocative efficiency. Empirical results based on data from 2000 to 2006 suggest that increased investment needs time to deliver increased productivity and efficiency, because new technology combined with fresh investment requires higher numbers of skilled workers, better managerial practices and an advanced input mix, all of which generally take time to develop. Thus, the Indian economy must boost technical efficiency by providing skilled workers and high quality managers to further economic reform.

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