IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/102904.html
   My bibliography  Save this paper

What Does Increasing Labour Homogeneity Mean for Indian Manufacturing?

Author

Listed:
  • Paul, Bino
  • Patnaik, Unmesh
  • Sahu, Santosh Kumar
  • Awasthi, Mansi

Abstract

In evaluating the economic system, the share of wage in value-added (labour share) assumes significance. We examine the trend of labour share in Indian manufacturing during 2001-14, by using the pooled plant-level data. In the analysis, the heterogeneities with respect to factor share, factor ratio and magnitude of factors (labour and capital) are gauged, while the trend of elasticity of substitution is measured. With this context, we assess if the labour heterogeneity explains the variation in the total factor productivity, taking the industry as a unit of analysis. Further, the analysis looks into the relationship between labour heterogeneity and productivity. Analysing the microdata on the labour force, we gauge the determinants of wage from the vantage of supply. Cues from this analysis point to the need for social up-gradation of Indian manufacturing in terms of decent employment relations and skill. This change may enable India to move from factor abundant system to a productivity-oriented economy in the milieu of steadfast substitution of labour by capital. The novelty of this paper is in pooling the plant-level data across years, while industry level aggregation is resorted to examine the longitudinal dynamics. Quite important, insights emanating from the firm and industry-based data are juxtaposed with the microdata of labour supply to understand the supply side dimensions of wage, while envisioning the implications for the economy of manufacturing to upgrade to a productivity orientation.

Suggested Citation

  • Paul, Bino & Patnaik, Unmesh & Sahu, Santosh Kumar & Awasthi, Mansi, 2020. "What Does Increasing Labour Homogeneity Mean for Indian Manufacturing?," MPRA Paper 102904, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:102904
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/102904/1/MPRA_paper_102904.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nitin Gupta, 2012. "Impact of Elasticities of Substitution, Technical Change, and Labour Regulations on Labour Welfare in Indian Industries," ASARC Working Papers 2012-10, The Australian National University, Australia South Asia Research Centre.
    2. Brent Neiman, 2014. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 61-103.
    3. Alokesh Barua & Bishwanath Goldar & Himani Sharma, 2015. "The Role of Technological Conditions of Production in Explaining India's Manufacturing Growth, 1998-00 to 2007-08: Some Policy Perspectives," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 15-04, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    4. Mincer, Jacob, 1984. "Human capital and economic growth," Economics of Education Review, Elsevier, vol. 3(3), pages 195-205, June.
    5. repec:ilo:ilowps:488132 is not listed on IDEAS
    6. Tran Nhuan KIEN & Yoon HEO, 2009. "Impacts Of Trade Liberalization On Employment In Vietnam: A System Generalized Method Of Moments Estimation," The Developing Economies, Institute of Developing Economies, vol. 47(1), pages 81-103, March.
    7. Diamond, Peter & McFadden, Daniel & Rodriguez, Miguel, 1978. "Measurement of the Elasticity of Factor Substitution and Bias of Technical Change," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.),Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 5, McMaster University Archive for the History of Economic Thought.
    8. Bishwanath GOLDAR & Suresh Chand AGGARWAL, 2005. "Trade Liberalization And Price-Cost Margin In Indian Industries," The Developing Economies, Institute of Developing Economies, vol. 43(3), pages 346-373, September.
    9. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    10. Ghosh, Saibal, 2013. "Do economic reforms matter for manufacturing productivity? Evidence from the Indian experience," Economic Modelling, Elsevier, vol. 31(C), pages 723-733.
    11. Rana Hasan & Devashish Mitra & Asha Sundaram, 2013. "What explains the high capital intensity of Indian manufacturing?," Indian Growth and Development Review, Emerald Group Publishing, vol. 6(2), pages 212 - 241, October.
    12. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    13. Fuss, Melvyn & McFadden, Daniel (ed.), 1978. "Production Economics: A Dual Approach to Theory and Applications," Elsevier Monographs, Elsevier, edition 1, number 9780444850133.
    14. repec:oup:qjecon:v:129:y:2013:i:1:p:61-103 is not listed on IDEAS
    15. Aradhna Aggarwal & Takahiro Sato, 2011. "Firm Dynamics and Productivity Growth in Indian Manufacturing: Evidence from Plant Level Panel Dataset," Discussion Paper Series DP2011-07, Research Institute for Economics & Business Administration, Kobe University.
    16. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    17. Arup Mitra & Chandan Sharma & Marie-Ange V�ganzonès-Varoudakis, 2012. "Estimating impact of infrastructure on productivity and efficiency of Indian manufacturing," Applied Economics Letters, Taylor & Francis Journals, vol. 19(8), pages 779-783, May.
    18. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
    19. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-954, July.
    20. Sivadasan Jagadeesh, 2009. "Barriers to Competition and Productivity: Evidence from India," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-66, September.
    21. Goldar, Bishwanath. & Sadhukhan, Amit., 2015. "Employment and wages in Indian manufacturing : post-reform performance," ILO Working Papers 994881323402676, International Labour Organization.
    22. Petia Topalova & Amit Khandelwal, 2011. "Trade Liberalization and Firm Productivity: The Case of India," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 995-1009, August.
    23. Bishwanath Goldar & Amit Sadhukhan, 2015. "Employment and Wages in Indian Manufacturing: Post-Reform Performance," Working Papers id:7349, eSocialSciences.
    24. Santosh Kumar Sahu & Himani Sharma, 2016. "Productivity, Energy Intensity and Output: A Unit Level Analysis of the Indian Manufacturing Sector," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(2), pages 283-300, December.
    25. Rana Hasan & Devashish Mitra & Asha Sundaram, 2013. "What explains the high capital intensity of Indian manufacturing?," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 6(2), pages 212-241, November.
    26. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, vol. 104(3), pages 112-114, September.
    27. Arnab K. Deb & Subhash C. Ray, 2013. "Economic Reforms and Total Factor Productivity Growth of Indian Manufacturing: An Inter-State Analysis," Working papers 2013-04, University of Connecticut, Department of Economics, revised Apr 2013.
    Full references (including those not matched with items on IDEAS)

    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. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    2. Victor Aguirregabiria & Margaret Slade, 2017. "Empirical models of firms and industries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(5), pages 1445-1488, December.
    3. Khanna, Rupika & Sharma, Chandan, 2022. "Impact of information technology on firm performance: New evidence from Indian manufacturing," Information Economics and Policy, Elsevier, vol. 60(C).
    4. Mertens, Matthias, 2019. "Micro-mechanisms behind declining labour shares: Market power, production processes, and global competition," IWH-CompNet Discussion Papers 3/2019, Halle Institute for Economic Research (IWH).
    5. Kailthya, Subham & Kambhampati, Uma, 2022. "Road to productivity: Effects of roads on total factor productivity in Indian manufacturing," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 174-195.
    6. Thomas Hasenzagl & Luis Perez, 2023. "The Micro-Aggregated Profit Share," Papers 2309.12945, arXiv.org, revised Nov 2023.
    7. Jan De Loecker & Pinelopi K. Goldberg & Amit K. Khandelwal & Nina Pavcnik, 2016. "Prices, Markups, and Trade Reform," Econometrica, Econometric Society, vol. 84, pages 445-510, March.
    8. Florin Maican & Matilda Orth, 2017. "Productivity Dynamics and the Role of ‘Big-Box’ Entrants in Retailing," Journal of Industrial Economics, Wiley Blackwell, vol. 65(2), pages 397-438, June.
    9. Mondolo, Jasmine, 2021. "Macroeconomic dynamics and the role of market power. The case of Italy," MPRA Paper 110172, University Library of Munich, Germany, revised 05 Oct 2021.
    10. Maican, Florin & Orth, Matilda, 2021. "Entry Regulations and Product Variety in Retail," CEPR Discussion Papers 15992, C.E.P.R. Discussion Papers.
    11. Stefano Schiavo & Lionel Nesta, 2017. "International Competition and Rent Sharing in French Manufacturing," DEM Working Papers 2017/07, Department of Economics and Management.
    12. Stiebale, Joel & Vencappa, Dev, 2022. "Import competition and vertical integration: Evidence from India," Journal of Development Economics, Elsevier, vol. 155(C).
    13. Jasmine Mondolo, 2021. "Macroeconomic dynamics and the role of market power. The case of Italy," DEM Working Papers 2021/17, Department of Economics and Management.
    14. Kasahara, Hiroyuki & Liang, Yawen & Rodrigue, Joel, 2016. "Does importing intermediates increase the demand for skilled workers? Plant-level evidence from Indonesia," Journal of International Economics, Elsevier, vol. 102(C), pages 242-261.
    15. Weilin Liu, 2022. "Did Trade Liberalization Boost Total Factor Productivity Growth in Manufacturing in India in the 1990s?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 43, pages 110-139, Fall.
    16. Zhang, Hongsong, 2019. "Non-neutral technology, firm heterogeneity, and labor demand," Journal of Development Economics, Elsevier, vol. 140(C), pages 145-168.
    17. Benjamin Lochner & Bastian Schulz, 2024. "Firm Productivity, Wages, and Sorting," Journal of Labor Economics, University of Chicago Press, vol. 42(1), pages 85-119.
    18. Bruno Merlevede & Angelos Theodorakopoulos, 2018. "Productivity Effects of Internationalisation Through the Domestic Supply Chain: Evidence from Europe," Working Papers of VIVES - Research Centre for Regional Economics 627689, KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics.
    19. Mauro Caselli, 2018. "Do all imports matter for productivity? Intermediate inputs vs capital goods," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 285-311, August.
    20. Maican, Florin & Orth, Matilda, 2021. "Determinants of economies of scope in retail," International Journal of Industrial Organization, Elsevier, vol. 75(C).

    More about this item

    Keywords

    Labour heterogeneity; TFP; Manufacturing; India;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:102904. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.