TFP growth, technical efficiency and catch-up dynamics: Evidence from Indian manufacturing

Pankaj Rawat and Seema Sharma

Economic Modelling, 2021, vol. 103, issue C

Abstract: Recent studies have shown that technical efficiency can be both persistent (long-term) and transient (short-term). However, their dynamics are under-examined compared to conventional technical efficiency. This study investigates the dynamics of both persistent and transient technical efficiencies and TFP growth in the Indian manufacturing sector. Using data on 10667 firms in 17 industries over 1999–2018, we employ a four-component stochastic frontier model to separate the persistent technical efficiency from the firm heterogeneity and the transient technical efficiency from the random noise. Results support the existence of both conditional and unconditional beta convergence in transient technical efficiency, indicating a catching-up by transiently inefficient firms. Convergence speed remains unaffected by firm characteristics; however, it slowed after the 2008-financial crisis. Results also show that with time persistently inefficient firms exit the market. Finally, the study investigates the drivers of TFP growth. We show that technical change and efficiency improvement drive the TFP growth.

Keywords: Total factor productivity; Persistent and transient technical efficiency; Manufacturing; Stochastic frontier analysis; Beta convergence (search for similar items in EconPapers)
JEL-codes: C23 D24 L25 L60 O14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S026499932100211X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:103:y:2021:i:c:s026499932100211x

DOI: 10.1016/j.econmod.2021.105622

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().