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The Cost Competitiveness of Manufacturing in China and India: An Industry and Regional Perspective

Author

Listed:
  • Bart Van Ark

    (Indian Council for Research on International Economic Rela)

  • Abdul Azeez

    (Indian Council for Research on International Economic Rela)

  • Erumban Vivian Chen

    (Indian Council for Research on International Economic Rela)

  • Chen Utsav Kumar

    (Indian Council for Research on International Economic Rela)

Abstract

This paper focuses on comparisons of productivity, (unit) labor cost and industry-level competitiveness for the manufacturing sector of China and India. We first provide a comparison between India and China using a broad international perspective. We find that China has increased its labor productivity to a level above that of India, but due to a somewhat higher compensation level, China is still somewhat at a disadvantage in terms of unit labor cost in manufacturing relative to India. In the second half of the paper, we make an analysis of industry level differences in productivity, labor compensation and unit labor costs at state and province level in the two countries from the mid 1990s to the early 2000s. We find rapid declines in unit labor cost across industries and provinces in China, but increases in many instances in India. This suggest that productivity and compensation growth have become much more aligned across regions in China whereas this is not (yet) the case in India. We relate these results to differences in the implementation of market reforms between the two countries and removal of barriers to resource mobility eradicating inefficient manufacturing activity

Suggested Citation

  • Bart Van Ark & Abdul Azeez & Erumban Vivian Chen & Chen Utsav Kumar, "undated". "The Cost Competitiveness of Manufacturing in China and India: An Industry and Regional Perspective," Indian Council for Research on International Economic Relations, New Delhi Working Papers 228, Indian Council for Research on International Economic Relations, New Delhi, India.
    • Handle: RePEc:ind:icrier:228
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    File URL: http://www.icrier.org/publication/Working_Paper_228.pdf
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    Cited by:

    1. Alan Heston, "undated". "What Can Be Learned About the Economies of China and India from Purchasing Power Comparisons?," Indian Council for Research on International Economic Relations, New Delhi Working Papers 229, Indian Council for Research on International Economic Relations, New Delhi, India.
    2. Yuming Cui & Changrong Lu, 2018. "Are China's unit labour costs still competitive? A comparison with ASEAN countries," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 32(1), pages 59-76, May.
    3. Joshi, Deepika & Nepal, Bimal & Rathore, Ajay Pal Singh & Sharma, Dipti, 2013. "On supply chain competitiveness of Indian automotive component manufacturing industry," International Journal of Production Economics, Elsevier, vol. 143(1), pages 151-161.

    More about this item

    Keywords

    O14; J24;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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