Productivity growth convergence across Indian states: a spatial dynamic panel analysis

Abstract

The study re-examines convergence among Indian states by estimating their total factor productivity (TFP) for the period 1990/91–2018/19. The novelty of the study is the decomposition of TFP change into efficiency change and technological change using the Malmquist index in a spatial dependence framework to test convergence. Findings reveal that, on average, productivity increased at an aggregate level for the entire period on account of the impressive growth of technological innovation. However, technological growth convergence could not lead to productivity growth convergence in the second sub-period because of no convergence in efficiency growth. Alongside, while we witness significant spatial spillovers in both technology and efficiency, convergence was observed only with respect to technology growth in the second sub-period. The congruence of technological convergence and significant spatial spillovers indicates that while states may be converging in technology, they do not do so independently but display movements similar to their regional neighbours.

Keywords:

• Productivity convergence
• spatial dependence
• Malmquist index
• dynamic panel data
• India

JEL CLASSIFICATION CODES:

• O47
• O53
• C21
• C23

Acknowledgements

We are thankful to the two anonymous reviewers and the editor for their incisive comments and suggestions that imparted more clarity and strengthened the context of the study. The usual disclaimer applies.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 For a detailed explanation of the empirical decomposition used in this paper, refer Ray (2002).

2 We use log-linear specification of the model following Banker, Natarajan, and Zhang (2019).

3 Control variables have been identified based on the survey of the extant literature.

4 Robustness checks are provided in the Appendix.

Additional information

Notes on contributors

Chhavi Tiwari

Chhavi Tiwari is a Postdoctoral Research Fellow at Institut national d’études démographiques (INED), Paris. She holds a PhD in Economics from the Indian Institute of Management Ranchi. Her papers have been published in journals like the Journal of Policy Modeling, Population Research and Policy Review, Journal of International Development, Transforming Government: People, Process and Policy, SAGE Open, IIM Kozhikode Society and Management Review.

Sankalpa Bhattacharjee

Sankalpa Bhattacharjee is an Assistant Professor at the Indian Institute of Management Ranchi. He holds a PhD in Economics from the University of Calcutta, India. His research has been published in journals like Applied Economics, Journal of Policy Modeling, Population Research and Policy Review, Journal of International Development, Economic & Political Weekly, IIMB Management Review, Futures, Journal of Global Operations and Strategic Sourcing.

Pradeepta Sethi

Pradeepta Sethi is an Associate Professor at T A Pai Management Institute, Manipal Academy of Higher Education. He holds a PhD in Financial Management from the National Institute of Financial Management, Faridabad, India. He has published his work in journals like Applied Economics, Journal of Policy Modeling, Population Research and Policy Review, Journal of Business Economics and Management, Journal of Economic Research, Journal of Financial Economic Policy.

Debkumar Chakrabarti

Debkumar Chakrabarti is an Associate Professor and Head of the Department of Economics, Ramakrishna Mission Vidyamandira, West Bengal, India. He did his PhD at Calcutta University. He has published his work in journals like Applied Economics, Journal of Policy Modeling, Population Research and Policy Review, Journal of International Development, Economic & Political Weekly, IIMB Management Review, Futures, Journal of Global Operations and Strategic Sourcing. He has also authored a book titled Investment Decision by Firms: Real and Financial Factors. His areas of interest are macroeconomics, industry and finance.