J-Curve of Productivity and Growth: Indian Manufacturing Post-Liberalization
IMF Working Papers, July 1, 2011
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- J-Curve of Productivity and Growth: Indian Manufacturing Post-Liberalization
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Bibliographic details
- Authors: Arvind Virmani, Danish A Hashim
- Published: July 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455298730.001
Overview
- Title: J-Curve of Productivity and Growth: Indian Manufacturing Post-Liberalization
- Authors: Arvind Virmani, Danish A Hashim
- Publication date: July 1, 2011
- Series: Working Paper No. 2011/163
- Issue: 163
Main findings
- Most estimates of Indian manufacturing productivity find a slowdown in the 1990s.
- This slowdown is puzzling because 1990s reforms were deeper and wider than the 1980s reforms that raised the growth rate of the Indian economy by 2 per cent points.
- The paper tests the hypothesis of the J curve of Productivity and Growth following major liberalization and finds it to be broadly supported by the data.
- Mechanisms identified as producing negative effects on measured productivity:
- Technological obsolescence
- Gradual adoption of new technology
- Learning by doing
Interpretation and implications
- The J-curve hypothesis: major liberalization can lead to an initial decline in measured productivity before gains materialize, due to the combined effects of obsolescence, adoption lags, and learning processes.
- Measured productivity can decline even as longer-term growth-enhancing forces from reforms are present, implying timing and measurement issues are critical for assessing reform outcomes.
Subject areas and keywords
- Subject: Economic sectors, Labor, Manufacturing, Production, Production growth, Productivity, Total factor productivity
- Keywords: aggregate manufacturing, capital goods, capital stock, cotton textiles consumer products, Economic reforms, fixed capital, Global, Indian manufacturing, industry composition, J-curve hypothesis, Manufacturing, output growth, petroleum product, petroleum refinery, petroleum refinery industry, plastic product, private sector, Production growth, Productivity, productivity & output growth, productivity differential, productivity growth, productivity slowdown, productivity spurt, productivity-enhancing effect, services productivity, technology-productivity incentive, Total factor productivity, WP