Productivity Growth in Indian Manufacturing sector
1. Productivity Growth in the
Indian Manufacturing Sector
October 2015
Madras School of Economics
Aarushi Kapoor
Akashna Sharma
Ashita Batra
Kaveri Chhikara
Sparsh Banga
Vidushi Singhi
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2. Contents
I. Introduction………………………2
II. Objectives and Problems………...3
III. Theoretical Review……………….5
IV. Empirical Review…………………6
V. Data and Methodology…………....8
VI. Policy Prescription………………..11
VII. Conclusion ………………………...12
VIII. References………………………….12
IX. Annexure…………………………...14
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3. I. INTRODUCTION
As productivity (growth) appears to be the single most important determinant of a nation’s
living standard or its level of real income over long periods of time, it is important to better
understand the productivity and sources of productivity growth. Productivity is an average
measure of the efficiency of production. It can be expressed as the ratio of output to inputs
used in the production process, i.e. output per unit of input.
In economics, total-factor productivity (TFP), also called multi-factor productivity, is a
variable which accounts for effects in total output not caused by traditionally measured
inputs of labour and capital. If all inputs are accounted for, then TFP can be taken as a
measure of an economy’s long-term technological change or technological dynamism. TFP
cannot be measured directly. Instead it is a residual, often called the Solow residual, which
accounts for effects in total output not caused by inputs but due to changes in technology
which further leads to productive efficiency.
Total Factor Productivity is often seen as the real driver of growth within an economy. TFP
is the major reason for changes in standard of living. Creation, transmission and absorption
of knowledge, technology and improvement of workers skill set etc are some of the factors
that drive TFP. The decomposition reveals that the technology improvement is the basic
force behind increasing average productivity.
In this paper, we will see frequently used productive measures like index number approach,
growth accounting approach, econometric approach and also try to find drawbacks attached
to these approaches. Then we have tried to write all the research that has been done by
different economists and what were their observations about the TFP in Indian manufacturing
across the years. We will also try to measure productivity or growth of TFP of manufacturing
sector in India. As we know that we can’t find the TFP directly so we will use the indirect
method to find the growth rate of TFP using growth rate of output, share and growth rate of
capital and labour. We will be assuming only two factors of production labour & capital
Using the above formula we will try to find what happens to growth rate of TFP over the
course of time. We will also list some major problems of the Indian manufacturing sector
and where we are lacking behind because of which we have not achieved the desired results.
Finally, as we know that the improvement in the TFP is not sustainable in India we have
tried giving some measures to solve these issues.
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4. II. OBJECTIVE
India has emerged as one of the fastest growing economies in the present
times.However,the current slowdown points out that long-run growth can be sustained
only through efficiency improvements and global competitiveness. The manufacturing
sector has contributed little to income, export and employment growth .Production has been
shifting away from agriculture, but mostly into services rather than manufacturing. Economic
growth in the last 15 years was led by services leaving manufacturing at 13% of GDP in FY
2013-14 which is low compared to peers. Thus the major concern is the sudden shift from
agriculture sector to service sector and through this paper the objective is to analyze the
reason pertaining to it in context of technological growth in the manufacturing sector.
PROBLEMS
The average share of manufacturing sector in real GDP has increased only marginally
from about 13 per cent during 1970-75 to about 17.9 per cent in 2012-13, i.e.,
approximately by about 4.9 percentage points over a period of more than three decades.
Thus, this increase has not matched the expectations from this sector. Some economist
say that service sector growth must be supported by proportionate growth of the
industrial sector, otherwise the service sector growth will not be sustainable. In India, the
service sector's contribution in GDP has sharply risen and that of industry has fallen.
The average contribution of unregistered manufacturing sector to real GDP of
manufacturing has been consistently declining over the years. In the earlier half of
the eighties, this share was approximately 45 per cent and it has fallen to about 33 per
cent in 2008-09.The unorganized manufacturing sector employs ( in 2005-06)almost
80 per cent of workforce manufacturing sector. In other words, we see the
disproportion not only between income and employment generation across sectors,
but also within the two segments of manufacturing sector, i.e., between its organized
and unorganized segments.
Registered manufacturing sector in India experienced growth of gross output at
annual average rate of 6% between 1970 and 2003 and net value added grew at
average 4.2%.But most of this growth was due to input growth (including material
and intermediate inputs) and TFP growth on average was only 1.1%per year.
However for the period between 1998-2003 both capital and labor input growth are
negative but the average rate of growth of gross output and net value added are 3.2%
and 0.6% respectively because of increased TFP growth which is estimated to
average around 2-3% for gross output based measure and 4.8% for net value added
measure. In the last decade TFPG rate was around 1.4 percent pa.
In the last 20 years, India has invested substantially in infrastructure, although not as
much as China. In many areas, investment targets have not been met, leaving
infrastructure in poor condition. Firms in India face frequent power outages and
transport infrastructure is below par. This has an especially harmful effect on
manufacturing, which is a sector highly reliant on well-functioning infrastructure. In
the short run, revival of investment in industry and key infrastructure sectors is the
key challenge. As per the latest first revised estimates of GDP, gross capital
formation in the manufacturing sector in 2011-12 (at 2004-05 prices) had declined by
18.8 per cent as compared to 2010-11
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5. The research and development activities in India have been primarily government
driven and private sectors have traditionally made little investment in R&D. India
has achieved great success in developing and educating a significant chunk of human
resources. The technical capabilities of these resources are well and truly recognized
the world over. However, there have been institutional gaps leading to poor industry-
academia interaction. The outcome has been low practical orientation of Indian
research and lack of technology inputs to industry.
India has taken initial steps in rectifying this situation by redefining its Science
and Technology policy, increasing the spend on R&D, establishment of mission
mode projects and enforcing interactions between research institutions and
industry. However, it still has a long way to go in catching up with the developed
world and investing 2-3% of GNP in R&D, protecting Intellectual Property and
establishing product innovation culture
Inter industry differences have also been observed. It is observed that
the(consumer) durables sector have witnessed negative efficiency change along
with positive TP in the last decade. The Machinery & Equipment sector has
experienced both improved efficiency and positive TP, while the (consumer) non-
durables, Intermediate goods, and unclassified manufacturing sectors have shown
positive efficiency change with negative technical progress
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6. III. THEORETICAL REVIEW
Solow pioneered productivity measurement in 1957, when he gave the growth accounting
approach to calculate total factor productivity as a residual obtained from the difference
between the rate of growth of output and combined productivity of labour and capital.
Since then this area of research has registered significant developments, wherein
economists have employed a variety of techniques to measure productivity. This involves
use of input-output tables, index numbers and econometrics. The choice of measurement
technique depends on the purpose of study and, in many cases, on the availability of data.
Broadly, we may talk about Single Factor Productivity (relates output measure to a single
measure of input) or Multiple Factor Productivity (relates output to a bundle of inputs).
Further, the nature of study may depend on whether Gross output measure is utilized or
Value-added output. The most comprehensive presentation for measurement of aggregate
and industry level productivity growth is collated in the OECD Productivity Manual
(2001). Listed below are the five most frequently used productivity measures following the
index number approach:
TYPE OF TYPE OF INPUT MEASURE
OUTPUT
MEASURE
LABOUR CAPITAL CAPITAL CAPITAL,
AND LABOUR AND
LABOUR INTERMEDIATE
INPUTS(ENERGY,
MATERIALS,
SEVICES)
GROSS Labour Capital Capital labour KLEMS multifactor
OUTPUT productivity productivity MFP(based on productivity
(based on (based on gross gross output)
gross output) output)
VALUE ADDED Labour Capital Capital-labour -
productivity productivity MFP(based on
(based on (based on value value added)
value added ) added)
SINGLE FACTOR MULTIPLE FACTOR
PRODUCTIVITY PRODUCTIVITY
Source: OECD Productivity Manual.
The manual defines productivity as the ratio of quantity index of volume of output to the
quantity index of the volume of inputs. It further states that value-added based labour
productivity is the most frequently used productivity statistic, followed by capital –labour
MFP and KLEMS MFP. Following international practices, the RBI undertook the KLEMS
research project in September 2009. It aimed at creating a database form 1980-81 for
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7. estimating productivity at the disaggregated industry level for the Indian economy and
estimating labour productivity and TFP for 26 industries at broad sectoral and economy level
for the period 1980-81 to 2008-09. Providing a comprehensive coverage, the KLEMS
research project facilitated international comparability of Indian statistics to that of other
economies.
It is, however, important to note certain deficiencies in the index number approach which
primarily focuses on the Hick’s neutral technical change, assumes constant returns to
scale and doesn’t take into account variations in adjustment cost and capacity utilization.
These drawbacks are absent in the econometric approach to productivity measurement
which is based on observations of volume of outputs and inputs. Morrison(1986) and
Prucha(2001) has worked extensively on this approach.
Keeping in line with most studies on productivity measurement in the Indian manufacturing
sector, this paper also employs the Growth Accounting approach. It is important to note that
GAA relies on a number of assumptions in the interest of simplicity.
Representation of the production process as a production or a transformation function,
which relates maximum amount of output produced to a given set of inputs.
There are constant returns to scale
Perfect competition prevails and market participants are price takers. Inputs are paid
their marginal products.
Producers behave efficiently i.e. they work towards minimizing costs or maximizing
revenues. This implies that the firm is operating on its production frontier.
As is true from the experience of the Indian studies on productivity, we see that the
exercise of productivity measurement is extremely sensitive to the technique used. The
most contentious issue in the arena of Indian manufacturing has been the use of single
deflation method versus double deflation, which provides contrasting results. This and
other such empirical considerations are discussed in the next section.
IV. EMPIRICAL STUDY
Very few other issues in Indian economic development has generated so much debate than
the measurement of total factor productivity (TFP) growth in Indian manufacturing. This
debate has intensified following the major economic reforms in 1991.Following is the
review of empirical work done on total factor productivity of india.
Isher judge Ahluwalia conducted an empirical analysis at a detailed level of disaggregation
which has clearly brought out the poor performance with respect to total factor productivity
growth up to the end of the seventies. However, there is also a hopeful finding in the
phenomenon of a turnaround in the first half of the eighties. Productivity growth was the
dominant source of the acceleration in the growth of value added, from 5 percent per
annum during the period of industrial drift (i.e. the period from 1965-66 to 1979-80) to 7.5
per cent per annum in the first half of the eighties. Total factor productivity in the
manufacturing sector grew at a rate of 3.4 per cent per annum in the first half of the eighties
compared with no growth in the preceding decade and a half; indeed, a slight decline at the
rate of 0.3 per cent per annum.
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8. An important feature of the improvement in the total factor productivity growth in the first
half of the eighties was that it largely reflected improvements in labour productivity
measured in terms of output per worker. Capital productivity (i.e. output per unit of capital)
showed neither an increase nor a decrease. The absence of a decline in capital productivity
was, however, an improvement from the earlier record which was characterized by a
declining trend in capital productivity. The period of the eighties appears to be significant
different in this respect because the increase in labour productivity does not only reflect
rising capital –labour ratios but represent pure productivity reflected in the strong
performance with respect to total factor productivity growth.
The second-generation studies drew attention to the biases in productivity estimates arising
from the use of value added function and particularly the use of single deflated value added.
Since the 1991 reforms were specifically targeted to the manufacturing sector due to the
realization that the sector offered much greater prospects for capital accumulation, technical
change and linkages and hence job creation, it is important to understand what has been the
behaviour of TFPG in the post-reform period. Goldar and Kumari, report that the trend
growth rate in TFP in Indian manufacturing (based on the gross output function framework)
came down from 1.89 per cent per annum during the period 1981-82 to 1990-91 to 0.69 per
cent per annum during the period 1990-91 to1997-98. Measurement of total factor
productivity (TFP) growth has generated much of a debate in Indian manufacturing. . Studies
by Krishna and Mitra (1998), Unel (2003) and Tata Services Ltd.(2003) find an acceleration
in TFPG in the 1990s, whereas studies by Trivedi et al. (2000),Srivastava (2000),
Balakrishnan et al. (2000), Ray (2002), Goldar and Kumari (2003), Goldar(2004), Goldar
(2006), Das (2004), Kumar (2004) and RBI (2004) find a deceleration in TFP in the
1990s.However, given the different methods used in these studies along with differences in
variable construction and data used does not allow for one to infer whether the large
differences in estimates (not just in magnitude but also the direction of change) are due to the
use of different methods or due to different approaches to variable construction or the use of
different data-sets. For example studies by Balakrishnan and Pushpangadan (1994) and
Mohan Rao (1996) contested the assertion made by Ahluwalia (1991) that there was a
marked acceleration in TFP growth in manufacturing after 1980 which was attributed to
liberalisation of economic policies. The discrepancies arose because Ahluwalia had relied on
the single-deflation (SD) procedure rather than more appropriate double-deflation (DD)
procedure used by Balakrishnan and Pushpangadan
Based on the findings of earlier studies on TFP growth in Indian manufacturing as it seems it
would be right to conclude that there has been a decrease, not an increase, in the growth rate
of TFP in Indian manufacturing in the post-reform period. This does not mean, however, that
reforms failed to have a favorable effect on industrial productivity. Rather, some research
undertaken recently (Goldar and Kumari, 2003; Topalova, 2003) has shown that trade
liberalization did have a positive effect on industrial productivity. The explanation for the
slowdown in TFP growth in Indian manufacturing in the post-reform period seems to lie in
the adverse influence of certain factors that more than offset the favourable influence of the
reforms. Two factors that seem to have had an adverse effect on industrial productivity in the
post-reform period are (a) decline in the growth rate of agriculture and (b) deterioration in
capacity utilization in the industrial sector (Goldar and Kumari, 2003). Uchikawa (2001,
2002) has pointed out that there was an investment boom in Indian industry in the mid-1990s.
While the investment boom raised production capacities substantially, demand did not rise
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9. which led to capacity under-utilization. Goldar and Kumari (2003) have presented
econometric evidence that indicates that the slowdown in TFP growth in Indian
manufacturing in the post-reform period is attributable to a large extent to deterioration in
capacity utilization.
V. DATA AND METHODOLOGY
ASI DATA
The Annual survey of Industries (ASI) is principal source of industrial statistics in India.
As per the period of study i.e. 1998-99 to 2012-13 basis of industrial classification changes.
NIC -1998 was then followed from ASI-1998-1999 to ASI 2003-04.From ASI 2004-05 the
new series of classification i.e. NIC-2004 has been introduced and the same has been used
till ASI 2007-08. From ASI -2008-09, NIC-2008 has been introduced. It classifies all the
factories in the ASI frame in their appropriate industry groups on the basis of the principal
product manufactured. This way a unit gets classified in one and only one industry group
even though it might be manufacturing products belonging to different industries the
estimates for different aggregates presented in this report at 2 or 3 digit level of industry
correspond to the NIC -2008 classification.
We are using estimate of selected characteristics of factory sector by 3-digit industry
group for all India.
The concepts and definitions of items collected through ASI schedule are given below:
Reference Year- for ASI 2012-13 is the accounting year of the factory ending on 31st March
2013 while the survey was conducted in 2013-14.
Factory- is one that is registered under sections 2m (i) and 2m (ii) of the Factories Act,
1948. The sections 2m (i) and 2m (ii) refer to any premises including the precincts thereof (a)
whereon ten or more workers are working, or were working on any day of the preceding
twelve months, and in any part of which a manufacturing process is being carried on with the
aid of power, or is ordinarily so carried on; or (b) whereon twenty or more workers are
working or were working on any day of the preceding twelve months, and in any part of
which a manufacturing process is being carried on without the aid of power, or is ordinarily
so carried on.
Fixed Capital-represents the depreciated value of fixed assets owned by the factory as on the
closing day of the accounting year. Fixed assets are those that have a normal productive life
of more than one year. Fixed capital includes land including lease- hold land, buildings,
plant & machinery etc.
No. of workers- are defined to include all persons employed directly or through any agency
whether for wages or not and engaged in any manufacturing process or in cleaning any part
of the machinery or premises used for manufacturing process or in any other kind of work
incidental to or connected with the manufacturing process or the subject of the manufacturing
process . Labour engaged in the repair & maintenance, or 4 production of fixed assets for
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10. factory's own use, or employed for generating electricity, or producing coal, gas etc.
are included.
Value of Output-comprises total ex-factory value of products and by-products
manufactured as well as other receipts such as receipts from non-industrial services
rendered to others, work done for others on material supplied by them, value of electricity
produced and sold, sale value of goods sold in the same condition as purchased, addition in
stock of semi-finished goods and own construction.
Methodology
Method used to calculate Total factor Productivity (TFP) growth is Gross Accounting
Method.
Growth accounting is a procedure used in economics to measure the contribution of
different factors to economic growth and to indirectly compute the rate of technological
progress, measured as a residual, in an economy. This methodology was introduced
by Robert Solow in 1957.It is a non- parametric approach
We have calculated the productivity growth by concentrating on aggregates of the industrial
sector.
The production function for entire industry is defined as –
Y=f(A,K,L) which is taken as a cobb-douglas production function given by-
where,
Y = total production (the value of all goods produced in a year),
L = labor input (the total number of person-hours worked in a year)
K = physical capital input (the value of all machinery, equipment, and buildings)
A = total factor productivity(Hicks Neutral)
α and β are the output elasticities of capital and labor, respectively. These values are
constants determined by available technology. ( α + β = 1 showing constant returns
to scale).
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11. GAA uses factor shares as the weights for the inputs implying the assumption of perfectly
competitive market structure. Total factor productivity growth is given by rate of growth
of A.
Accounting identity is given by-
Rate of growth of Y= Rate of growth of A+ share of K*rate of growth of K+share of L*rate
of growth of L.
Formulae used-
A) Rate of growth of output, capital and labour is given by-
[VPresent - VPast]/ VPast
Where:
VPresent = Present or Future Value
VPast = Past or Present Value
B) Share of capital= fixed capital/value of output
C) Share of workers= no. of workers (monetary terms)/value of output
Stock of physical capital is fixed capital, any kind of real physical asset that is not used up in
the production of a product. is mapped by fixed capital data available in ASI estimates.
Similarly Labour force is mapped by no. of workers as per ASI estimates.
Now,
Substituting the required values in accounting equation to find TFP growth which is given
by=
Rate of growth of A=Rate of growth of Y -share of K *rate of growth of K + share of
L*rate of growth of L.
Next
We have used Regression Analysis to show that contribution of labour, contribution of
capital and TFP growth positively affects rate of growth of output. The results for the same
are shown in annexure-2.
We have used reciprocal model to establish this relation. Reciprocal model is used so as to
bring in line the signs of regression coefficients with their a priori expectations. Low
standard errors show the precise estimates of our regression model.
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12. VI. POLICY PRESCRIPTION
Some of the components of policy reforms, such as, reduction in trade barriers have led to
improvement in productivity growth.But the reforms dealing with micro-foundations for each
industry are yet to be formulated and implemented.The current trend of improving TFP is not
sustainable.The manufacturing sector is highly resource intensive and adequate measures
should be taken towards development of infrastructure that facilitates the improvement of
factor productivity. The intra-sectoraldisparity, between organized and unorganized segments
is getting widened. Atomistic markets, such as, food industry, leather,chemical and textiles
are in need of institutional mechanisms, which will provide them with key inputs including
technology for their improved performance. Thus, if the welfare of the masses is to be
improved, it is necessary to make these industries globally competitive and this may also take
care of the unbalanced regional development of the states.
Most labour has moved from agriculture to the informal non-agricultural sector and this has
boosted productivity. However, at the same time, labour has moved out of the highest-
productivity sector – the formal sector. The proportionate fall in formal employment was
greatest in the public sector and, even in the most productive formal private sector, the share
of employment has fallen slightly. As a result, the overall impact of changes in employment
shares has been to reduce the growth of labour productivity
The reallocation of resources to more productive uses that would be expected to occur in an
increasingly open economy has only taken place slowly. This appears to be a consequence of
too few exits of firms, low labour migration across states and ongoing high concentration of
production in some industries.
Given the relatively small size of many manufacturing firms, India is reaping far smaller
gains from scale economies than many other countries. Larger establishments often use
newer technologies and thus achieve higher productivity, while smaller establishments are
much less productive. In India these small scale firms seems quiet persistent. This is the
result of investment restrictions in the past. industry experts reveal excessive fragmentation
of business operations into small subcontracting units to avoid regulations that further
exacerbate the problem by creating further inefficiencies.
Efficiency may also be adversely affected in a limited number of industries due to very
high concentration and the presence of dominant public-sector firms. the state or publicly-
controlled commercial sector in India remains relatively large
Appropriate policies in terms of lowering the regulatory restrictions in the product and
service markets may hold the potential to increase productivity across industries in the
coming decades.TFP has not been a narrow phenomenon but is broad-based across many
industries. Similar results hold for labour productivity growth. It indicates that nearly two
decades of policy reforms in the areas of trade and industry have made a difference.
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13. CONCLUSION
The ASI data that we have taken shows the growth rate of TFP. It’s very difficult to see a
trend in the growth rate of TFP because it first increases then decreases. The financial and
economic crisis could define the poor growth rate of TFP in years 2008-2010. Furthermore,
2012 is considered to be the worst year in this decade for India in terms of economic stability
and growth rates thus such poor growth rates of TFP can be observed. In the years when
everything was normal growth rates has increased. The stock of TFP still increases no matter
the growth rate of TFP increases or decreases. We have seen that the gross value of output
has increased which is a kind of relief because it shows that the efficiency of labour and
capital has increased over the years. We have seen whenever there is economic instability the
growth rate of TFP decreases so the government should try to minimize these disturbances
like controlling inflation, Current account deficit etc. Though the TFP growth rate is rising
but still Indian manufacturing has a lot of potential and it can do wonders along with the well
defined government policies and regulations.
REFERENCES
AggarwalAradhna; Sato Takahiro ,'Firm dynamics & productivity growth in Indian
manufacturing ;evidence from plant level panel dataset"
Ahluwalia, I.J. (1991), Productivity and Growth in Indian Manufacturing, Oxford University
Press, New Delhi.
Bollard Albert,KlenowJ.Peter and Sharma Gunjan.(2010)"India’s Mysterious Manufacturing
Miracle".Stanford University, Stanford University , University of Missouri.
Dholakia, Ravindraet al (2009), Trends in Technical Progress in India- Analysis of Input-
Output tables from 1968 to 2003, W.P. No. 2009-11-02, IIM-A
GoldarBishwanath,(2004)productivity trends in Indian manufacturing in the Pre and Post
reform periods(working paper 137 Indian council for research on international economic
relations
Limam and Miller,Explaining Economic Growth (2003): Factor Accumulation, Total Factor
Productivity Growth, and Production Efficiency Improvement
Isher judge ahluwalia ,(1991)productivity and growth in Indian
manufacturing(oxford university press, New Delhi )
Morrison, Catherine J. (1986), “Productivity Measurement with Non-Static Expectations and
Varying Capacity Utilization: An integrated Approach”, Journal of Econometrics 33, pp 51-
74
OECD (2011), Measuring Productivity OECD manual, Measurement of Aggregate and
Industry-level Productivity growth,, OECD Paris
RBI (2014) ,Estimates of Productivity Growth for Indian Economy
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18. ROG_output = rate of growth of output
Reci_contriwork = reciprocal of contribution of workers
Contri_capital = contribution of capital
A priori all the variables are correctly signed.
All the variables are statistically significant.
Tests and results
A)Breusch-Pagan test for heteroskedasticity -
Null hypothesis: heteroskedasticity not present
Test statistic: LM = 2.35803
with p-value = P(Chi-square(3) > 2.35803) = 0.501494
interpretation- Since p-value is large therefore no heteroscedasticity in the
data B) LM test for autocorrelation up to order 1 -
Null hypothesis: no autocorrelation
Test statistic: LMF = 0.0519746
with p-value = P(F(1,9) > 0.0519746) = 0.824757
Interpretation- Since p-value is large so we fail to reject the null hypothesis of
no autocorrelation
C) Test for normality of residual -
Null hypothesis: error is normally distributed
Test statistic: Chi-square(2) = 1.35203
with p-value = 0.508639
Interpretation- errors are normally distributed
D) RESET test for specification (squares only) -
Null hypothesis: specification is adequate
Test statistic: F(1, 9) = 0.301901
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19. with p-value = P(F(1, 9) > 0.301901) = 0.596062
Interpretation- with large p-value we accept null hypothesis showing no specification
error E) Chow test for structural break at observation 2004 -
Null hypothesis: no structural break
Test statistic: F(4, 6) = 2.03187
with p-value = P(F(4, 6) > 2.03187) = 0.208817
interpretation- large p-value suggests that there is no structural break in 2004
F) Interpretation of coefficients-
a) reci_contiwork-
As the contribution of workers increases by 0.01 ,ceteris paribus, on average rate of growth
of output increases by 1.17445e-07
b)contri_capital
As the contribution of capital increases by 0.01,ceteris paribus,on average rate of growth
of output increases by 4.60956
C) TFPG-
As total factor productivity growth increases by 0.01 ,ceteris paribus, on average rate
of growth of output increases by 0.802213.
d)constant-
it has no economic
significance G) R- squared-
0.995651 % of the variation in rate of growth of output is explained by explanatory variables.
H) P-value(F)
Since p value of F test is low so we reject the null hypothesis of R squared =0 I)AIC
and SIC are low , high R-squared represents the goodness of fit of the model. Low
standard errors represents precise estimates of the model.
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