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Impact of infrastructure on output, productivity and efficiency

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  • Chandan Sharma
  • Sanjay Sehgal

Abstract

Purpose - The purpose of this paper is to provide an empirical evaluation of the impact of infrastructure development on industry‐level productivity, output and efficiency in India over the period 1994‐2006. Design/methodology/approach - The first stage, estimated total factor productivity (TFP) and technical efficiency of eight important industries. In the next stage, the effects of infrastructure were estimated on TFP, output, labor productivity and technical efficiency. Fully modified ordinary least squares procedure was utilized to generate consistent estimates of the relevant panel variables in the cointegrated frameworks. Findings - The results of this study are mixed. On the one hand, TFP, output and technical efficiency appear to be positively and largely affected by infrastructure. On the other hand, the effect of infrastructure on the labor productivity is somewhat negligible. In addition, the effects of information and communication technology on the industrial performance are found to be very weak. Originality/value - This is the first study of its kind in the related literature which attempts to investigate the role of infrastructure in industrial performance, using alternative frameworks, namely, growth accounting and production function approach. The paper uses appropriate techniques to account for the potential endogeneity of regressors as well as for multicollinearity among infrastructure variables.

Suggested Citation

  • Chandan Sharma & Sanjay Sehgal, 2010. "Impact of infrastructure on output, productivity and efficiency," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 3(2), pages 100-121, September.
    • Handle: RePEc:eme:igdrpp:v:3:y:2010:i:2:p:100-121
    DOI: 10.1108/17538251011084446
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    Cited by:

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    2. Mitra, Arup & Sharma, Chandan & Véganzonès-Varoudakis, Marie-Ange, 2014. "Trade liberalization, technology transfer, and firms’ productive performance: The case of Indian manufacturing," Journal of Asian Economics, Elsevier, vol. 33(C), pages 1-15.
    3. Isabelle Joumard & Urban Sila & Hermes Morgavi, 2015. "Challenges and Opportunities of India's Manufacturing Sector," OECD Economics Department Working Papers 1183, OECD Publishing.
    4. Marie-Ange VEGANZONES-VAROUDAKIS & Arup MITRA & Chandan SHARMA, 2012. "Are reforms productive? Explaining productivity and efficiency in the Indian manufacturing," Working Papers 201233, CERDI.
    5. Chandan Sharma & N.R. Bhanumurthy, 2011. "Estimating Infrastructural Investment Needs for India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 5(2), pages 221-243, May.
    6. Mitra, Arup & Sharma, Chandan & Véganzonès-Varoudakis, Marie-Ange, 2016. "Infrastructure, information & communication technology and firms’ productive performance of the Indian manufacturing," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 353-371.
    7. John Bosco Nnyanzi & Susan Kavuma & John Sseruyange & Aisha Nanyiti, 2022. "The manufacturing output effects of infrastructure development, liberalization and governance: evidence from Sub-Saharan Africa," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(2), pages 369-400, June.
    8. Dibyendu Maiti, 2019. "Trade, Labor Share, and Productivity in India’s Industries," ADB Institute Series on Development Economics, in: Gary Fields & Saumik Paul (ed.), Labor Income Share in Asia, chapter 0, pages 179-205, Springer.
    9. Adel Mohsen & Soo Chua & Che Sab, 2015. "Determinants of industrial output in Syria," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 4(1), pages 1-12, December.
    10. Li, Yan & Chen, Zhenhua & Wang, Peng, 2020. "Impact of high-speed rail on urban economic efficiency in China," Transport Policy, Elsevier, vol. 97(C), pages 220-231.
    11. C Sharma, 2016. "Does importing more inputs raise productivity and exports? Some evidence from Indian manufacturing," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 1-23, March.
    12. SHARMA Anand, 2017. "Dynamic Externalities And Regional Manufacturing Growth: Evidence From India," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 12(1), pages 185-201, April.
    13. Lopamudra D. Satpathy & Bani Chatterjee & Jitendra Mahakud, 2017. "Firm Characteristics and Total Factor Productivity: Evidence from Indian Manufacturing Firms," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 11(1), pages 77-98, February.
    14. Sharma, Chandan & Mitra, Arup, 2015. "Corruption, governance and firm performance: Evidence from Indian enterprises," Journal of Policy Modeling, Elsevier, vol. 37(5), pages 835-851.

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