Total Factor Productivity in India – An Analysis of Productivity of States
Total Factor Productivity growth is an indispensable factor for long term economic growth. Previous studies have used traditional methods to estimate the TFP Growth in India based on the firm level data. Traditional methods often prone to the problem of simultaneous bias, selection bias and endogenity. Present study had used four advanced methods to provide a comparative analysis of TFP state-wise using data directly at State level for period 2004-05 to 2017-18. The study had concluded that labour is significant in all the methods and capital is significant only in two methods. This provides an important policy implication for the Indian Economy that Indian Government should make policies which focuses more on Labour augmented production polices. This will improve the production in the Indian Economy in the long run.
Keywords - Total Factor Productivity, Olley and Pakes, Levinsohn and Petrin, Wooldridge, Mollisi-Rovigatti, Semiparametric Estimators, Residuals