Abstract
One of the important sources of growth of an economy is the efficient and productive use of existing resources. The Indian industries after three decades of protected industrial culture has produced an inefficient regime. This is supposed to be corrected by the on-going economic liberalization. An application of Time-Varying Frontier Production Function approach with both fixed and variable ranking models in Indian industries helps in testing the hypothesis of intertemporal movement of technical efficiencies (TE) on which the current globalization program is based. The results are significantly conclusive: TEs have been falling over time. This along with TFP changes helps us to understand the nature of industrial development in recent past. An inquiry into the sources of inter-industry efficiency variations shows that skill, labor productivity and profit play significantly positive role, while capital intensity works against general beliefs.
Similar content being viewed by others
References
Afriat, S.N. (1972). “Efficiency Estimation of Production Function.”International Economic Review, 13: 568–598.
Ahluwalia, I. (1987).Industrial Growth in India: Stagnation since Mid-Sixties, Delhi: OUP.
Ahluwalia, I. (1991).Productivity and Growth in India Manufacturing, Delhi: OUP.
Aigner, D.J. and Chu, S.F. (1968). “Estimating the Industry Production Function.”American Economic Review, 58: 826–839.
Aigner, D.J., Lovell, C.A.K. and Schmidt, P. (1977). “Formulation and Esitmation of Stochastic Frontier Production Function Models.”Journal of Econometrics, 6: 21–37.
Arrow, K.J., Chenery, H.B., Minhas, B.S., and Solow, R.M. [1961]. “Capital Labor Substitution and Economic Efficiency.”Review of Economic and Statistics, 43: 225–250.
Banuri, T. (1991).Economic Liberalization: No Panacea, Oxford, New York: Clarendon Press.
Battese, G.E. and Coelli, T.J. (1988). “Prediction of Firm Level Technical Efficiencies With a Generalized FPF and Panel Data.”Journal of Econometrics, 38: 387–399.
Battese, G.E. and Coelli, T.J. (1991). “Frontier Production Functions, Technical Efficiency and Panel Data: With Application to Paddy Farmers in India.” Working Paper, Department of Econometrics, University of New England.
Bhagavan, M.R. (1985). “Capital Goods Sector in India: Past and Present Trends and Future Prospects.”Economic and Political Weekly, 20:404–421.
Bhagwati, J. and Desai, P. (1970).India: Planning for Industrialization, Industrialization and Trade Policies Since 1951. Delhi: OUP.
Bhagwati, J. and Srinivasan, T.N. (1975).Foreign Trade Regimes and Economic Development: India. Delhi: Macmillan.
Bhavani, T.A. (1991). “Technical Efficiency in Indian Modern Small Scale Sector: An Application of FPF.”Indian Economic Review, 26: 149–166.
Chandak, H.L. and The Policy Group. (1990).India Data Base: The Economy, New Delhi: Living Media India Ltd.
Clague, C. (1970). “The Determinants of Efficiency in Manufacturing Industries in an Underdeveloped Country.”Economic Development and Cultural Change, 18: 188–205.
Coelli, T.J. (1991). “Maximum-Likelihood Estimation of Stochastic Frontier Production Function with Time-Varying Technical Efficiency using the Computer Program, FRONTIER Version 2.0.” Working Paper, Department of Econometrics, University of New England.
Condoo, D., Neogi, C. and Ghosh, B. [1993]. “Technology Intensive Industrialization in LDGs: Experience of Indian Industries.”Economic and Political Weekly, 28: M43-M52.
Cornwell, C., Schmidt, P. and Sickles, R.C. (1990). “Production Frontiers with Cross-sectional and Time Series Variation in Efficiency Levels.Journal of Econometrics, 46: 185–200.
Debreu, J. (1951). The Coefficient of Resource Utilization.Econometrica, 129: 272–292.
Farrell, M.J. (1957). The Measurement of Productive Efficiency.Journal of The Royal Statistical Society, A. 120, Part 3: 253–281.
Forsund, F.R., Lovell, C.A.K. and Schmidt, P. (1980). “A Survey of FPFs and of Their Relationship to Efficiency Measurement.”Journal of Econometrics, 13: 5–25.
Ghosh, B. and Neogi, C. (1993). “Productivity, Efficiency and New Technology: A Case of Indian Manufacturing Industries.”The Developing Economies, 31: 308–328.
Government of India. (1960–61 to 1987–88). Annual Survey of Industry. Ministry of Planning, New Delhi.
Government of India. (1974–75 to 1987–88). Indian Labour Journal. Labour Bureau, Simla.
Government of India. (1974–75 to 1987–87). National Accounts Statistics. Ministry of Planning, New Delhi.
Hashim, B.R. and Dadi, M.M. (1973).Capital-Output Relations in Indian Manufacturing (1946#64). Baroda: M.S. University.
Joseph, K.J. (1989). “Growth Performance of Indian Electronics Under Liberalization.”Economic and Political Weekly, 24.
Kumbhkar, S.C. (1990). “Production Frontiers, Panel Data and Time-Varying Technical Inefficiency.”Journal of Econometrics, 46: 201–211.
Kumbhakar, S.C., Ghosh, S. and McGukin, J.T. (1991). “A Generalized Production Function Approach for Estimating Determinants of Inefficiency in U.S. Diary Farms.”Journal of Business and Economic Statistics, 9: 279–286.
Laumas, P.S. and Williams, M. (1981). “The Elasticity of Substitution in India's Manufacturing Sector.”Journal of Development Economics 8: 325–337.
Leontief, W. (1953). “Esitmates of the Capital Stock of American Industries, 1947,” Harvard Economic Research Project, Cambridge, Mass., pp. 21–22.
Little, I.M.D., Mazumder, D., and Page, J.M. Jr. (1987).Small Manufacturing Enterprises. World Bank Research Publication, New York: OUP.
Meeusen, W. and Broeck, J. (1977). “Effieiency Estimation from Cobb-Douglas Production Functions with Composed Error.”International Economic Review 18: 435–444.
Nishimizu, M. and Page, J.M. Jr. (1982). “Total Factor Productivity Growth, Technological Progress and Technical Efficiency Change: Dimension of Productivity Change in Yugoslavia, 1965–78.”The Economic Journal, 92: 920–936.
Pal, M., Neogi, C., Ghosh, B. (1992). “On the Solution of Minimum Absolute Deviation FPF.” Technical Report of Indian Statistical Institute, ERU/2/92.
Patel, I.G. (1992). “New Economic Policies: A Historical Perspective.”Economic and Political Weekly, 27: 41–46.
Pitt, M.M. and Lee, L.F. (1981). “The Measurement and Sources of Technical Inefficiency in the Indonesian Weaving Industry.”Journal of Development Economics, 9: 43–64.
Reserve Bank of India. (1985). “Foreign Collaborations in Indian Industries,” Fourth Survey Report, RBI, Bombay.
Richmond, J. (1974). “Estimating the Efficiency of Production.”International Economic Review, 15: 515–521.
Sandesara, J.C. (1991). “New Industrial Policy: Questions of Efficient Growth and Social Objectives.”Economic and Political Weekly, 26: 1869–1872.
Sato, K. (1975). Production Functions and Aggregations. Amsterdam: North-Holland.
Schmidt, P. (1985–6). “Frontier Production Functions.”Econometric Reviews, 4(2): 289–328.
Schmidt, P. and Sickles, R.C. (1984). “Production Frontiers and Panel Data.”Journal of Business and Economic Statistics, 4: 367–374.
Singh, J. (1991). “Plant Size and Technical Efficiency in the Indian Thermal Power Industry.”Indian Economic Review 26: 239–52.
Solow, R.M. (1956). “A Contribution to the Theory of Economic Growth.”Quarterly Journal of Economics, 70: 65–94.
Solow, R.M. (1966). “Review of Capital and Growth.”American Economic Review, 56: 1257–1260.
Subrahmanian, K.K. (1991). “Technological Capability under Economic Liberalism: Experience of Indian Industry in Eighties.”Economic and Political Weekly, 26: M87-M92.
Timmer, C.P. (1971). “Using a Probablistic Frontier Production Function to Measure Technical Efficiency.”Journal of Political Economy, 79: 776–794.
White, L.J. (1978). “The Evidence of Appropriate Factor Proportions for Manufacturing in LDCs: A Survey.”Economic Development and Cultural Change, 27.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Neogi, C., Ghosh, B. Intertemporal efficiency variations in Indian manufacturing industries. J Prod Anal 5, 301–324 (1994). https://doi.org/10.1007/BF01073913
Issue Date:
DOI: https://doi.org/10.1007/BF01073913