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Productivity and efficiency of labour intensive manufacturing industries in India: an empirical analysis

Purna Chandra Parida and Kailash Pradhan ()

International Journal of Development Issues, 2016, vol. 15, issue 2, 130-152

Abstract: Purpose - The study makes an attempt to identify labour intensity of organized manufacturing industries in India using the Annual Survey of Industry (ASI) data at 3-digit level. It estimates Total Factor Productivity Growth (TFPG) and technical efficiency for both labour intensive and all manufacturing industries during the pre- and post-reforms periods. Design/methodology/approach - The study uses three approaches to estimate TFPG. They are growth accounting (GA) (non-parametric), production function with correction for endogeneity – Levinsohn-Petrin (LP) (semi-parametric) and stochastic production frontier analysis (SFA) (parametric). The study uses ASI data published by Central Statistical Organisation (CSO), Government of India for the period 1980-81 to 2007-08 for the analysis. Findings - The study finds that, the rate of decline of the labour intensity is more pronounced in the case of labour intensive industries than all the manufacturing industries. The results of Growth Accounting (GA) method suggest that the TFPG of labour intensive industries has declined continuously from the pre-reforms period to the post-reforms period. Similarly, Levinsohn-Petrin (LP) method indicate a continuous decline in TFPG of labour intensive manufacturing industries during the post-reforms period. Interestingly, the results of Stochastic Production Frontier (SPF) method also corroborate the findings of earlier two methods at the aggregate level but vary at a certain degree at the disaggregated level. Originality/value - This paper is useful in the context of India considering the importance given to labour intensive industries by the present government in terms of reviving the sector and improving the productivity and output.

Keywords: Productivity; Efficiency; Labour intensity; Manufacturing sector in India; D24; L60; O30 (search for similar items in EconPapers)
Date: 2016
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