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Trade and Investment Liberalization in India: Implications for Productivity Gains

In: Foreign Direct Investment and Small and Medium Enterprises Productivity and Access to Finance

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  • Ram Upendra Das

Abstract

Since 1991, India has witnessed wide-ranging economic reforms in its policies governing international trade and foreign direct investment (FDI) flows which has consequently led to a dramatic rise in both trade and FDI flows since then. Using firm-level panel data, this chapter investigates whether these trends have contributed to significant productivity improvements since 2000, as measured by total factor productivity (TFP). In addition, the chapter also examines the determinants of TFP across a range of different industry categories. The results suggest the existence of significant productivity improvements since 2000 and also identify variables such as imports of raw materials and capital goods, size of operation, quality of employment captured by wage rates, and technology imports as crucial determinants of productivity.

Suggested Citation

  • Ram Upendra Das, 2015. "Trade and Investment Liberalization in India: Implications for Productivity Gains," World Scientific Book Chapters, in: Khee Giap Tan & Kong Yam Tan (ed.), Foreign Direct Investment and Small and Medium Enterprises Productivity and Access to Finance, chapter 3, pages 35-55, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814678810_0003
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    1. Luis Garicano & Claire Lelarge & John Van Reenen, 2016. "Firm Size Distortions and the Productivity Distribution: Evidence from France," American Economic Review, American Economic Association, vol. 106(11), pages 3439-3479, November.
    2. Stähler, Frank & Raff, Horst & Long, Ngo Van, 2007. "The Effects of Trade Liberalization on Productivity and Welfare: The Role of Firm Heterogeneity, R&D and Market Structure," Economics Working Papers 2007-20, Christian-Albrechts-University of Kiel, Department of Economics.
    3. Martin Bijsterbosch & Marcin Kolasa, 2010. "FDI and productivity convergence in Central and Eastern Europe: an industry-level investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(4), pages 689-712, January.
    4. Wenjun Liu & Shoji Nishijima, 2013. "Productivity and openness: firm level evidence in Brazilian manufacturing industries," Economic Change and Restructuring, Springer, vol. 46(4), pages 363-384, November.
    5. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
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    More about this item

    Keywords

    Foreign Direct Investment; The Spillover Effects; Small and Medium Enterprises; Regional Innovation; Entrepreneurial Activities; Trade and Investment; Bank Lending; Labor Productivity;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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