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Study of linkages between productivity, export, and outward foreign direct investment: An empirical perspective of Indian manufacturing industries

Prajukta Tripathy, Pragyanrani Behera and Bikash Ranjan Mishra

International Journal of Finance & Economics, 2023, vol. 28, issue 2, 1527-1548

Abstract: This study examines the nexus among productivity, export, and flow of outward FDI among 23 categories of two‐digit Indian manufacturing industries during the period of 2008–2016. For the empirical purpose, this study employs a panel ARDL‐PMG method for cointegration and VECM Granger causality tests. We segregate 23 manufacturing industries into high, medium, and low productive groups based on their productivity performance, which is estimated by Levinsohn‐Petrin (2003) productivity procedure. We find that the long‐run and short‐run relationship among these three variables varies across three groups. Further, there is a long‐run and strong causality exists among the three core variables in all three categories irrespective of their variance in productivity performances. Thus, there is a need for a comprehensive and unified industrial policy in line with trade and FDI as the choice variables are well‐connected in the long‐run.

Date: 2023
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