TITLE:
Determinants of Total Factor Productivity Growth in India
AUTHORS:
Bishwanath Goldar, Sadhan Kumar Chattopadhyay, Siddhartha Nath, Sreerupa Sengupta, Pilu Chandra Das
KEYWORDS:
India KLEMS, TFP, ARDL Model, 2SLS IV, Panel Data
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.3,
June
30,
2023
ABSTRACT: Purpose: The paper identifies the structural determinants of total
factor productivity (TFP) growth in India between 1990 to 2019. Design/Methodology/ Approach: To examine the drivers of
TFP growth at the aggregate
level, ARDL models are used, whereas for identifying the sectoral level determinants,
panel pooled group mean estimation methods suggested by Peseran et al. (1999) and
2SLS-IV approaches are used. Findings: The
empirical analysis suggests at the economic level, a significant portion of the variation of aggregate TFP growth is
explained by idiosyncratic shocks like deviations in rainfall, and exogenous global factors like global GDP growth rates. Public investment in
infrastructure, an increase
in the share of ICT capital in aggregate fixed capital, and improved global exposure through higher exports and
inflows of foreign direct investment (FDI)
are also associated with increased TFP growth. At the sectoral level, we find
that productivity growth in the input-producing
sectors and improvements in labour qualities are associated with higher TFP growth
in all the sectors in India. Capital deepening
is associated with improved TFP
growth in manufacturing and market services. Originality/Value: To the best of our knowledge, this is the first attempt to empirically estimate
structural determinants of TFP growth in
India using India KLEMS and other nationally representative official
data sources.