IDEAS home Printed from https://ideas.repec.org/a/sae/manlab/v46y2021i1p24-37.html
   My bibliography  Save this article

Open Door System and Endogenous Growth in Indian Economy: An Empirical Analysis on the Role of Human Capital and R&D in Explaining Industrial Productivity

Author

Listed:
  • Arjun K.
  • Sanjay Kumar
  • A. Sankaran
  • Mousumi Das

Abstract

The present study investigates the impact of human capital, knowledge capital which is a function of human capital, and real exchange rate scenario in explaining long-run industrial total factor productivity (TFP) from 1980 to 2015 on the theoretical basis of the open endogenous growth model. The variables employed in the contemporary study include manufacturing value added (MNVA) as industrial output measure, gross fixed capital formation (GFCF) as a measure of capital and labour input which is measured using employment data. Gross enrolment ratio (GER) is taken as a measure for human capital formation, expenditure on research and development (R&D) as a proxy for knowledge capital, and real exchange rate indicates global economic shocks. The study involves estimating TFP for Industrial Sector during the post-liberalization period by employing Cobb-Douglas production function. The ARDL bounds test technique for cointegration revealed long-run relation among the varying factors studied. The Toda-Yamamoto causality test concluded bi-directional causality running between, R&D expenditure and Industrial TFP which sends a strong signal to the policymakers for a well-framed long-term integrated approach for human & knowledge capital formation which will act as a strong impetus for manufacturing firms to come up in terms of augmenting production and productivity and expanding foreign market horizon. JEL Classification: D24, E2, J24

Suggested Citation

  • Arjun K. & Sanjay Kumar & A. Sankaran & Mousumi Das, 2021. "Open Door System and Endogenous Growth in Indian Economy: An Empirical Analysis on the Role of Human Capital and R&D in Explaining Industrial Productivity," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 46(1), pages 24-37, February.
    • Handle: RePEc:sae:manlab:v:46:y:2021:i:1:p:24-37
    DOI: 10.1177/0258042X20976948
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0258042X20976948
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0258042X20976948?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Isabelle Joumard & Urban Sila & Hermes Morgavi, 2015. "Challenges and Opportunities of India's Manufacturing Sector," OECD Economics Department Working Papers 1183, OECD Publishing.
    3. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    4. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    5. B. Zorina Khan, 2018. "Human capital, knowledge and economic development: evidence from the British Industrial Revolution, 1750–1930," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 12(2), pages 313-341, May.
    6. van Zon, Adriaan & Yetkiner, I. Hakan, 2003. "An endogenous growth model with embodied energy-saving technical change," Resource and Energy Economics, Elsevier, vol. 25(1), pages 81-103, February.
    7. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    8. Temple, Jonathan & Voth, Hans-Joachim, 1998. "Human capital, equipment investment, and industrialization," European Economic Review, Elsevier, vol. 42(7), pages 1343-1362, July.
    9. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    10. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    11. Mara P. Squicciarini & Nico Voigtländer, 2015. "Human Capital and Industrialization: Evidence from the Age of Enlightenment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(4), pages 1825-1883.
    12. Richard C. Marston, 1988. "Misalignment of Exchange Rates: Effects on Trade and Industry," NBER Books, National Bureau of Economic Research, Inc, number mars88-1, June.
    13. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    14. Gary S. Becker, 1964. "Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, First Edition," NBER Books, National Bureau of Economic Research, Inc, number beck-5, June.
    15. Anwar, Sajid, 2008. "Foreign investment, human capital and manufacturing sector growth in Singapore," Journal of Policy Modeling, Elsevier, vol. 30(3), pages 447-453.
    16. Ma, Li & Zhai, Xin & Zhong, Weiguo & Zhang, Zhi-Xue, 2019. "Deploying human capital for innovation: A study of multi-country manufacturing firms," International Journal of Production Economics, Elsevier, vol. 208(C), pages 241-253.
    17. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    18. Panagariya, Arvind, 2011. "India: The Emerging Giant," OUP Catalogue, Oxford University Press, number 9780199751563.
    19. Nancy L. Stokey, 1991. "Human Capital, Product Quality, and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 587-616.
    20. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    21. Raut, Lakshmi K., 1995. "R & D spillover and productivity growth: Evidence from Indian private firms," Journal of Development Economics, Elsevier, vol. 48(1), pages 1-23, October.
    22. Nicholas Kaldor, 1966. "Marginal Productivity and the Macro-Economic Theories of Distribution: Comment on Samuelson and Modigliani," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 33(4), pages 309-319.
    23. Chindo Sulaiman & Umar Bala & Bulama Abiso Tijani & Salisu Ibrahim Waziri & Ibrahim Kabiru Maji, 2015. "Human Capital, Technology, and Economic Growth," SAGE Open, , vol. 5(4), pages 21582440156, November.
    24. William H. Branson & James Love, 1988. "U.S. Manufacturing and the Real Exchange Rate," NBER Chapters, in: Misalignment of Exchange Rates: Effects on Trade and Industry, pages 241-276, National Bureau of Economic Research, Inc.
    25. Ekholm, Karolina & Moxnes, Andreas & Ulltveit-Moe, Karen Helene, 2012. "Manufacturing restructuring and the role of real exchange rate shocks," Journal of International Economics, Elsevier, vol. 86(1), pages 101-117.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cheng, Chen & Li, Siming & Han, Jiajun, 2022. "Origin matters: How does institution imprint affect family business TFP?," International Review of Financial Analysis, Elsevier, vol. 83(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Klenow, Peter J. & Rodriguez-Clare, Andres, 2005. "Externalities and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 11, pages 817-861, Elsevier.
    2. Pozzolo, Alberto Franco, 2004. "Endogenous Growth in Open Economies - A Survey of Major Results," Economics & Statistics Discussion Papers esdp04020, University of Molise, Department of Economics.
    3. repec:ebl:ecbull:v:2:y:2002:i:1:p:1-15 is not listed on IDEAS
    4. Aykut Kibritçioglu, 2002. "On the Smithian origins of "new" trade and growth theories," Economics Bulletin, AccessEcon, vol. 2(1), pages 1-15.
    5. Aribah Aslam, 2020. "The hotly debate of human capital and economic growth: why institutions may matter?," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(4), pages 1351-1362, August.
    6. Jones, Larry E. & Manuelli, Rodolfo E., 1997. "The sources of growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 75-114, January.
    7. Long, N.V. & Wong, K.Y., 1996. "Endogenous Growth and International Trade: A Survey," Working Papers 96-07, University of Washington, Department of Economics.
    8. Sivropoulos-Valero, Anna Alexandra, 2021. "Education and economic growth," LSE Research Online Documents on Economics 114434, London School of Economics and Political Science, LSE Library.
    9. Ruttan, Vernon W., 1998. "Growth Economics And Development Economics: What Should Development Economists Learn (If Anything) From The New Growth Theory?," Bulletins 12972, University of Minnesota, Economic Development Center.
    10. Olusanya, Oluwakorede, 2020. "Asymmetric Effect of Foreign Direct Investment on Manufacturing Sector Performance in Nigeria," MPRA Paper 113029, University Library of Munich, Germany.
    11. Nazrul Islam, 2003. "What have We Learnt from the Convergence Debate?," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 309-362, July.
    12. Aikaterini Kokkinou, 2006. "Innovation and Productivity a Story of Convergence and Divergence Process in EU Countries," ERSA conference papers ersa06p452, European Regional Science Association.
    13. Valentinyi, Ákos, 1995. "Endogén növekedéselmélet. Áttekintés [Endogeneous theory of growth: a review]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 582-594.
    14. Carine Nourry, 2012. "Dasgupta, D.: Modern growth theory," Journal of Economics, Springer, vol. 105(1), pages 97-100, January.
    15. Dakpogan, Arnaud & Smit, Eon, 2018. "The effect of electricity losses on GDP in Benin," MPRA Paper 89545, University Library of Munich, Germany.
    16. Turnovsky, S., 2000. "Growth in an Open Economy: some Recent Developments," Papers 5, Warwick - Development Economics Research Centre.
    17. Mariusz Próchniak & Bartosz Witkowski, 2006. "Modelowanie realnej konwergencji w skali międzynarodowej," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 10, pages 1-31.
    18. Adriana Di Liberto, 2007. "Convergence and Divergence in Neoclassical Growth Models with Human Capital," Economia politica, Società editrice il Mulino, issue 2, pages 289-322.
    19. Ikonen, Pasi, 2010. "Effect of finance on growth through more efficient utilization of technological innovations," Bank of Finland Research Discussion Papers 21/2010, Bank of Finland.
    20. Ralph Hippe & Roger Fouquet, 2024. "The Human Capital Transition and the Role of Policy," Springer Books, in: Claude Diebolt & Michael Haupert (ed.), Handbook of Cliometrics, edition 3, pages 411-457, Springer.
    21. Ayres, Robert U, 2001. "The minimum complexity of endogenous growth models:," Energy, Elsevier, vol. 26(9), pages 817-838.

    More about this item

    Keywords

    Endogenous growth Model; total factor productivity (TFP); human capital and technology;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:manlab:v:46:y:2021:i:1:p:24-37. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.xlri.ac.in/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.