Some comments on total factor productivity and its growth in India

Published: Mar 9, 2022

Abstract:

Purpose: This paper considers the prospects for constructing a model of Total Factor Productivity (HenceTFP) of investment, technological progress and growth of the technological share in TFP.

Research Methodology: This paper tries to understand the driving factors of TFP by establishing the relations between the factors.

Results: Models consider emphasizing investment, technological progress and its impact on TFP and also on relation of investment with TFP and growth of technological share in TFP through the experience process. The claims in models provide a relation between investment and TFP; a relation between technological efficiency and technological progress is formed and their effect on TFP is also established.

Limitations: The limitations of the study are that we have considered selected parameters of TFP only. To study TFP completely a fuller model is needed where all the parameters would be considered.

Contribution: This study will help to understand TFP and its internal dynamics. A quotient between technological progress and investment is constructed that hampers the growth of technological progress. This gives a caution to the financial institutions about the enhancement of the quotient.

Keywords:
1. Growth
2. Investment
3. Technological efficiency
4. Technological progress
5. Total factor productivity
Authors:
Partha Partim Dube
How to Cite
Dube, P. P. (2022). Some comments on total factor productivity and its growth in India. International Journal of Financial, Accounting, and Management, 3(4), 301–315. https://doi.org/10.35912/ijfam.v3i4.704

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References

    Acemoglu, D. & Robinson, J. A. 2012. Why Nations Fail: The Origin of Power, Prosperity and Poverty, 1st ed. Crown, New York.

    Adak, M. 2009. Total Factor Productivity and Economic Growth, Istanbul Ticaret Universitesi, Journal of Social Sciences, 8 (15), 49 -56.

    Alvarez, R. & Fuentes, R. J. 2018. Minimum Wage and Productivity: Evidence from Chilean Manufacturing Plants, Economic Development and Cultural Change, 67 (1), 193 – 224.

    Ark, B. van & Haan, J, de 1999. A Miracle or Not? Recent Trends in the Growth Performance of the Dutch Economy, in P.A.G. van Bergeijk, J. van Sinderen and B.A. Vollard (eds.), Structural Reform in Open Economies: a Road to Success? Cheltenham/Northampton: Edward Elgar, 157-179.

    Ark, B. Van & Haan, J. De 2000. The Delta- Model Revisited: Recent Trends in the Structural Performance of the Dutch Economy, International Review of Applied Economics, 94 (3), 307–321.

    Barro, R. J. & Sala-i-Martin, X. 1995. Capital mobility in neoclassical models of growth, American Economic Review, 85 (1), 103–115.

    Barro, R. J. & Sala-i-Martin, X. 1997. Technological diffusion, convergence and growth, Journal of Economic Growth, 2(1), 1–26.

    Ben Zeev, N. & Khan, H. 2015. Investment – Specific News Shocks and US Business Cycles, Journal of Money, Credit and Banking, 47 (7), 1443 – 1464.

    Bollard, A.; Klenow, P & Sharma, G. 2013. India’s mysterious manufacturing miracle, Review of Economic Dynamics, 16, 59 – 85.

    Carlaw, K. & Kosempel, S. 2004. The Sources of Total Factor Productivity: Evidence from Canadian data, Economics of Innovation and New Technology, 13 (4), 299 -309.

    Choi, J. Y. & Beak, J. 2017. Does FDI Really Matter in Economics, Economies, 5 (2), 20.

    Collins, S. M. & Bosworth, B. P. 1996. Economic growth in East Asia: Accumulation versus Assimilation, Brooking Papers on Economic Activity, 27 (2), 135 – 91.

    Easterly, W. & Levine, R. 2001. It’s Not Factor Accumulation: Stylized Facts and Growth Models, The World Bank Economic Review, 15 (2), 177 – 219.

    Essers, D., Megersa, K & Sanfilippo, M. 2020. The productivity Gaps of Female – Owned firms: Evidence from Ethiopian Census Data, Economic Development and Cultural Change, 69 (2), 645 – 683.

    Figueirodo, L. & Nakabashi, L. 2016. The relative importance of total factor productivity and factors of production in income per worker: evidence from the Brazilian states. EconomiA, 17 (2), 159- 175.

    Frohlich, C. T. & Sauter, B. M. 2016. America’s Richest (and Poorest States), Special Report, 24/7 Wall Street, September 15.

    Fuentes, R. J. & Morales, M. 2011. On the Measurement of Total factor Productivity: A Latent Variable Approach, Macroeconomic Dynamics, 15 (2), 145 – 159.

    Gordon, R.J. 2016. The Rise and Fall of American Growth: The U. S. Standard of Living since The Civil War, Princeton University Press.

    Grossman, G. & Helpman, E. 1991. Innovation and Growth in the World Economy, MIT Press, Cambridge, MA.

    Hall, E. R. & Charles, I. Jones. 1999. Why do Some Countries Produce So Much More Output per Worker than Others, The Quarterly Journal of Economics, 114 (1), 83 – 116.

    Hulten, C. R. 2001. Total Factor Productivity. A Short Biography., in New Developments in Productivity Analysis, Edited by Hulten, C. R., Dean, R. Edwin. & Harper, J. M., NBER, The University of Chicago Press, 1 -54.

    Jagri, I. 2007. Determinants of Total Factor of Productivity, Journal of Economic Cooperation, 28 (3), 41 – 58.

    Kim, J. II & Lau, L. J. 1994. The sources of economic growth of the East Asian newly industrialized countries, Journal of the Japanese and International Economies, 8 (3), 235 – 71.

    Klenow, J. P. & Rodriguez, C. A. 1997. The Neoclassical revival in Growth Economics: Has It Gone Too Far?, NBER, Macroeconomics Annual edited by Bernanke, S. B. & Rotemberg, J., Vol. 12, 73 – 103.

    Koedijk, K. & Kremers, J. J. M. 1996. Market Opening, Regulation and Growth in Europe, Economic Policy, 23 (October), 445- 467.

    Krugman, P. 1994. The Myth of Asia’s Miracle, Foreign Affairs, 73 (6): 62 -78.

    Malik , A. M.; Masood, T. & Sheikh, A. M. 2021. Econometric Analysis of Total factor Productivity in India, The Indian Economic Journal, 69 (1), 88- 104.

    Mankiw, G. N.; Romer, D. & Weil, N. D. 1992. A Contribution to the Empirics of Economic Growth, The Quarterly Journal of Economics, 107 (2), 407 – 437.

    Munyawarara, N. & govender, K. K., 2020. Clustering the Agricultural Sector in Eastern Highlands, Zimbabwe, International Journal of Financial Accounting and Management, 1 (4), 247 – 255.

    Nadiri, M. I. & Kim, S. 1996. R & D, Production Structure and Productivity Growth: A Comparison of the Us., Japan and Korean Manufacturing Sectors, NBER Working Paper No. w 5506.

    Ӧzak, Ӧ. 2018. Distance to the Pre-industrial Technological Frontier and Economic Development, Journal of Economic Growth, 23, 175 – 221.

    Pieri, F.; Veechi, M. & Venturini, F. 2017. Modelling the Joint Impact of R & D and ICT on Productivity: A Frontier Analysis Approach, DEM Working Paper, 2017/13.

    Planning Commission, Government of India, 15 July 2014.

    Ratha, D.; Mohapatra, S & Silwal, A. 2011. The Migration and Remittances Fact Book 2011, Migration and Remittances Unit, The World Bank.

    Saleem, H.; Shazad, M.; Khan, B. M. & Khilji, B. A. 2019. Innovation, Total Factor Productivity and Economic Growth in Pakistan, Journal of Economic Structures, 8 (7). https://doi.org/10.1186/s40008-019-0134-6.

    Schmitt-Grohe^', S. & Uribe, M. 2012. “What’s News in Business Cycles?”, Econometrica, 80 (6), 2733 – 2764.

    Smith, J. S. 2020. International Trade Promotion Methods for SMEs in Low and Lower- Middle Income economies, International Journal of Financial Accounting and Management, 1 (3), 131 – 145.

    Vassdal, T.& Holst, S. M. H. 2011. Technical Progress and Regress in Norwegian Salmon: A Malmquist Index Approach, Marine Resource Economics, 26 (4), 329 – 341.

    Venturini, F. 2015. The Modern Drivers of Productivity, Research Policy, 44 (2), 357 – 369.

    Young, A. 1992. A tale of two cities: Factor accumulation and technical change in Hong Kong and Singapore, in NBER macroeconomics Annual 1992, edited by Oliver Blanchard and Stanely Fischer, Cambridge, MIT Press, 13 – 53.

    Young, A. 1995. The tyranny of numbers: Confronting the statistical realities of the East Asian experience, The Quarterly Journal of Economics, 110 (3), 641 - 80.

  1. Acemoglu, D. & Robinson, J. A. 2012. Why Nations Fail: The Origin of Power, Prosperity and Poverty, 1st ed. Crown, New York.
  2. Adak, M. 2009. Total Factor Productivity and Economic Growth, Istanbul Ticaret Universitesi, Journal of Social Sciences, 8 (15), 49 -56.
  3. Alvarez, R. & Fuentes, R. J. 2018. Minimum Wage and Productivity: Evidence from Chilean Manufacturing Plants, Economic Development and Cultural Change, 67 (1), 193 – 224.
  4. Ark, B. van & Haan, J, de 1999. A Miracle or Not? Recent Trends in the Growth Performance of the Dutch Economy, in P.A.G. van Bergeijk, J. van Sinderen and B.A. Vollard (eds.), Structural Reform in Open Economies: a Road to Success? Cheltenham/Northampton: Edward Elgar, 157-179.
  5. Ark, B. Van & Haan, J. De 2000. The Delta- Model Revisited: Recent Trends in the Structural Performance of the Dutch Economy, International Review of Applied Economics, 94 (3), 307–321.
  6. Barro, R. J. & Sala-i-Martin, X. 1995. Capital mobility in neoclassical models of growth, American Economic Review, 85 (1), 103–115.
  7. Barro, R. J. & Sala-i-Martin, X. 1997. Technological diffusion, convergence and growth, Journal of Economic Growth, 2(1), 1–26.
  8. Ben Zeev, N. & Khan, H. 2015. Investment – Specific News Shocks and US Business Cycles, Journal of Money, Credit and Banking, 47 (7), 1443 – 1464.
  9. Bollard, A.; Klenow, P & Sharma, G. 2013. India’s mysterious manufacturing miracle, Review of Economic Dynamics, 16, 59 – 85.
  10. Carlaw, K. & Kosempel, S. 2004. The Sources of Total Factor Productivity: Evidence from Canadian data, Economics of Innovation and New Technology, 13 (4), 299 -309.
  11. Choi, J. Y. & Beak, J. 2017. Does FDI Really Matter in Economics, Economies, 5 (2), 20.
  12. Collins, S. M. & Bosworth, B. P. 1996. Economic growth in East Asia: Accumulation versus Assimilation, Brooking Papers on Economic Activity, 27 (2), 135 – 91.
  13. Easterly, W. & Levine, R. 2001. It’s Not Factor Accumulation: Stylized Facts and Growth Models, The World Bank Economic Review, 15 (2), 177 – 219.
  14. Essers, D., Megersa, K & Sanfilippo, M. 2020. The productivity Gaps of Female – Owned firms: Evidence from Ethiopian Census Data, Economic Development and Cultural Change, 69 (2), 645 – 683.
  15. Figueirodo, L. & Nakabashi, L. 2016. The relative importance of total factor productivity and factors of production in income per worker: evidence from the Brazilian states. EconomiA, 17 (2), 159- 175.
  16. Frohlich, C. T. & Sauter, B. M. 2016. America’s Richest (and Poorest States), Special Report, 24/7 Wall Street, September 15.
  17. Fuentes, R. J. & Morales, M. 2011. On the Measurement of Total factor Productivity: A Latent Variable Approach, Macroeconomic Dynamics, 15 (2), 145 – 159.
  18. Gordon, R.J. 2016. The Rise and Fall of American Growth: The U. S. Standard of Living since The Civil War, Princeton University Press.
  19. Grossman, G. & Helpman, E. 1991. Innovation and Growth in the World Economy, MIT Press, Cambridge, MA.
  20. Hall, E. R. & Charles, I. Jones. 1999. Why do Some Countries Produce So Much More Output per Worker than Others, The Quarterly Journal of Economics, 114 (1), 83 – 116.
  21. Hulten, C. R. 2001. Total Factor Productivity. A Short Biography., in New Developments in Productivity Analysis, Edited by Hulten, C. R., Dean, R. Edwin. & Harper, J. M., NBER, The University of Chicago Press, 1 -54.
  22. Jagri, I. 2007. Determinants of Total Factor of Productivity, Journal of Economic Cooperation, 28 (3), 41 – 58.
  23. Kim, J. II & Lau, L. J. 1994. The sources of economic growth of the East Asian newly industrialized countries, Journal of the Japanese and International Economies, 8 (3), 235 – 71.
  24. Klenow, J. P. & Rodriguez, C. A. 1997. The Neoclassical revival in Growth Economics: Has It Gone Too Far?, NBER, Macroeconomics Annual edited by Bernanke, S. B. & Rotemberg, J., Vol. 12, 73 – 103.
  25. Koedijk, K. & Kremers, J. J. M. 1996. Market Opening, Regulation and Growth in Europe, Economic Policy, 23 (October), 445- 467.
  26. Krugman, P. 1994. The Myth of Asia’s Miracle, Foreign Affairs, 73 (6): 62 -78.
  27. Malik , A. M.; Masood, T. & Sheikh, A. M. 2021. Econometric Analysis of Total factor Productivity in India, The Indian Economic Journal, 69 (1), 88- 104.
  28. Mankiw, G. N.; Romer, D. & Weil, N. D. 1992. A Contribution to the Empirics of Economic Growth, The Quarterly Journal of Economics, 107 (2), 407 – 437.
  29. Munyawarara, N. & govender, K. K., 2020. Clustering the Agricultural Sector in Eastern Highlands, Zimbabwe, International Journal of Financial Accounting and Management, 1 (4), 247 – 255.
  30. Nadiri, M. I. & Kim, S. 1996. R & D, Production Structure and Productivity Growth: A Comparison of the Us., Japan and Korean Manufacturing Sectors, NBER Working Paper No. w 5506.
  31. ?zak, ?. 2018. Distance to the Pre-industrial Technological Frontier and Economic Development, Journal of Economic Growth, 23, 175 – 221.
  32. Pieri, F.; Veechi, M. & Venturini, F. 2017. Modelling the Joint Impact of R & D and ICT on Productivity: A Frontier Analysis Approach, DEM Working Paper, 2017/13.
  33. Planning Commission, Government of India, 15 July 2014.
  34. Ratha, D.; Mohapatra, S & Silwal, A. 2011. The Migration and Remittances Fact Book 2011, Migration and Remittances Unit, The World Bank.
  35. Saleem, H.; Shazad, M.; Khan, B. M. & Khilji, B. A. 2019. Innovation, Total Factor Productivity and Economic Growth in Pakistan, Journal of Economic Structures, 8 (7). https://doi.org/10.1186/s40008-019-0134-6.
  36. Schmitt-Grohe^', S. & Uribe, M. 2012. “What’s News in Business Cycles?”, Econometrica, 80 (6), 2733 – 2764.
  37. Smith, J. S. 2020. International Trade Promotion Methods for SMEs in Low and Lower- Middle Income economies, International Journal of Financial Accounting and Management, 1 (3), 131 – 145.
  38. Vassdal, T.& Holst, S. M. H. 2011. Technical Progress and Regress in Norwegian Salmon: A Malmquist Index Approach, Marine Resource Economics, 26 (4), 329 – 341.
  39. Venturini, F. 2015. The Modern Drivers of Productivity, Research Policy, 44 (2), 357 – 369.
  40. Young, A. 1992. A tale of two cities: Factor accumulation and technical change in Hong Kong and Singapore, in NBER macroeconomics Annual 1992, edited by Oliver Blanchard and Stanely Fischer, Cambridge, MIT Press, 13 – 53.
  41. Young, A. 1995. The tyranny of numbers: Confronting the statistical realities of the East Asian experience, The Quarterly Journal of Economics, 110 (3), 641 - 80.