ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Where Have All the Workers Gone?

India's post-reform economic development has seen a sustained decline in the labour intensity of the organised manufacturing sector, including in labour-intensive industries. This paper argues that this occurred due to an increase in the real wage to rental price of capital ratio, which, in turn, was mostly due to a fall in the relative price of capital goods. The decrease was driven by trade reforms in capital goods, and falling import tariffs on capital goods. While a fall in the relative price of capital may have led to an increase in the rate of private fixed investment in machines, and consequently, economic growth, one inadvertent consequence of the trade reforms was that they disincentivised firms from hiring labour.

Manufacturing Productivity under Varying Trade Regimes, 1980-2000

This paper examines the productivity performance of Indian manufacturing under varying trade regimes. The analysis focuses on the overall period of 1980-2000 and four sub-periods to reflect the shifts in trade policy regime. There is no evidence of much change in total factor productivity growth following liberalisation of the regime initiated in the early 1990s. As in the 1980s, factor accumulation rather than productivity growth accounts for most of the output growth during this period.
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