Absolute and Conditional Convergence: Its Speed for Selected Countries for 1961--2001

The study gives the theoretical justification for the per capita growth equations using Solovian model(1956) and its factor accumulation assumptions. The different forms of the per capita growth equation is used to test for 'absolute convergence' and 'conditional convergence' hypotheses and also work out the speed of absolute and conditional convergence for selected countries from 1961-2001.Only EU and East Asian countries together have shown uniform evidence of absolute convergence in all periods. While EU as a region has shown significant evidence of absolute convergence in two periods, 1961-2001 and 1970-2001, there is no convincing statistical evidence in favor of absolute convergence in the last two periods: 1980-2001 and 1990-2001. The speed of absolute convergence in the four periods range between 0.99-2.56 % p.a. (2% for the EU was worked out by Barro and Xavier Sala-i-Martin, 1995, for European regions) for EU while it ranges between 0.57-1.16 % p.a. for the countries in East Asia and EU regions together. However, there is no evidence of convergence among the South Asian countries in all periods and some major CIS republics since 1966.There is however tendency for absolute convergence among countries of South Asia, East Asia and European Union together particularly after the 1980s. Conditional convergence is prevalent among almost all pairs of regions in our sample except East Asian and South Asian nations together. Speed of conditional convergence ranges from 0.2 % in an year to 22%.In the European nations, the speed of conditional convergence works out be nearly 20 % unlike the speed of absolute convergence which hovered around 2 %.Such results would mean that countries in Europe are converging very quickly to their own potential level of incomes per capita but not so quickly to a common potential level of income per capita.Growth equation; absolute convergence; conditional convergence; speed of absolute and conditional convergence; elasticity of output with respect to capital; half life of convergence

Growth Accounting for Some Selected Developing, Newly Industrialized and Developed Nations from 1966-2000: A Data Envelopment Analysis

We work out technical efficiency levels of 29 countries consisting of some selected South Asian, East Asian and EU countries using data envelopment analysis. Luxembourg has an efficiency score of one(most efficient) in all the years .Netherlands also has an efficiency score of one in 1966,1971,1976 and 1981.Japan,UK,Belgium,Ireland,Indonesia,Spain and Germany has an efficiency score of one in at least one of the years from 1966 to 2000.In the year 2000 though mean efficiency levels(without including life expectancy as input) of South Asian countries is higher than the European Union Countries and East Asian countries. Japan has the highest average efficiency followed by Hong Kong in the East Asian region in the period 1966-2000. We also decompose labor productivity growth into components attributable to technological changes (shifts in the overall production frontier), technological catch up or efficiency changes(movement towards or away from the frontier),capital accumulation(movement along the frontier) and human capital accumulation( proxied by life expectancy).The overall production frontier is constructed using deterministic methods requiring no specification of functional form for the technology nor any assumption about market structure or the absence of market imperfections. Growth accounting results tend to convey that for the East Asian and the South Asian countries efficiency changes(technological catch up) have contributed the most, while for the European countries it is the technical changes which has contributed more to labour productivity changes between 1966-2000. We also analyze the evolution of cross country distribution for the 29 countries included in our sample using Kernel densities. It seems that there are other factors like trade openness,quality of governments,population rate of growth, savings rate, corruption perception indices, rule of law index, social capital and trust variables, formal and informal rules governing the society, among others, rather than the ones that are included below for the growth accounting exercise which may be responsible for productivity accounting on point to point basis. For all the seven periods(point to point basis) we see a major role played by technological changes and efficiency changes together to account for the current period counterfactual distributions and for the bimodal distribution in year 2000, and for the period 1966-2000(not point to point basis –an excercise done similar to Kumar and Russell(2002)) we find technical changes and its combination with other tripartite and quadripartite changes jointly account for the bimodal distribution in year 2000.However, from this growth accounting exercise, we do find that there is convergence in statistical terms of efficiency changes and human capital accumulation across countries of the EU, South Asian and East Asian regions.: Data envelopment analysis, growth accounting, technical efficiency, efficiency change, technological change, capital accumulation, human capital accumulation, kernel smoothing, cross country labor productivity distribution and counterfactual distributions

Relative benefits/losses of India aligning with RCEP and BRICS countries under the conjecture of free trade area in goods

The present study works out the relative benefits/losses of India aligning with RCEP and BRICS member countries under the conjecture of free trade area in good trade only. The study uses partial (SMART model) and general equilibrium (GTAP model) tools for this assessment. The main focus in the study is to compare the benefits/losses to Indian economy associated with both policy scenarios. The results reveal that it would be beneficial for India to align with other RCEP member countries under the policy of free trade area in goods trade. If India wants to join BRICS FTA in the near future then it must negotiate for the entry of its own specialized products into their markets and in reciprocity, it should allow the entry of their specialized products in to the domestic market. The results are in favor to make free trade area between RCEP countries which is more beneficial for India in comparison to make BRICS FTA

Indian IT industry: a performance analysis and a model for possible adoption

India's software and services exports have been rising rapidly. The annual growth rate ranges between 20 -22% in IT services and nearly 55 % in IT-enabled services (ITES), such as call centres, Business Process Outsourcing ( BPO) and other administrative support operations. Together they are predicted to grow at 25% pa till 2010.The IT industry is highly export oriented and the exporters are predominantly Indian. The Indian BPOs (ITES) are moving up the value chain, handling high end data for airline information, insurance, banking sector and mortgage companies, enterprise resource planning, among others. Some of the companies have already moved into significantly higher value added segments such as mission- critical applications, development and support, product design, HR Management, knowledge process outsourcing for pharmaceutical companies and large complex projects. Software exports make up 20 % of India's total export revenue in 2003-04, up from 4.9 % in 1997.This figure is expected to go up to 44% of annual exports by 2010. Though India accounts for just about 3 % of the world market for information technology services, this sector has been growing at a scorching pace, helped by a large pool of English-speaking workers, nearly 4 million engineers and the increasing tribe of tech-savvy entrepreneurs in the country. The Information Technology industry currently accounts for almost 4.8 % of India's GDP. It will account for 7 % of India's GDP by 2010. Software and IT enabled services have emerged as a niche sector for India. This was one of the fastest growing sectors in the last decade with a compound annual growth rate exceeding 50 per cent. Software service exports increased from US $0.50 million in 1990 to$5.9 billion in 2000-01 to 23.6 billion dollars in 2005-06 recording a 34% growth. A compound annual growth of over 25% per annum is expected over the next 5 years even on the expanding base. The impact on the economy of projected software and IT enabled service exports of 60 billion by 2010 is likely to be profound. One manifestation is that India notched up a current account surplus in 2001-02, for the first time in 24 years. India further needs an open environment under GATS to promote exports of services through outsourcing and off-shoring . The present study examines the growth performance of India’s IT industries, with particular attention paid to the role of policy in this process. The study recognizes that emergence of a strong Indian IT industry happened due to concerted efforts on the part of the Government, particularly since 1980s, and host of other factors like Government-Diaspora relationships, private initiatives, emergence of software technology parks, clustering and public private partnerships. In this study we further look at the major parameters of the Indian IT and ICT industry in global context and give justification for including the main factors responsible for the IT boom in India. The study has looked into the past and present trends of the Indian IT industry and has considered further needs of IT sector to act as a catalyst of growth and development. The study has examined whether the Indian IT growth does have enough lessons for other countries to model their IT policy which may help them to shape their IT industry as driver of growth and development. IT firms were actually required to export software in the early days of the industry. This arose in the context of a shortage of foreign exchange in India in the 1970s and early 1980s.Software firms that needed imported inputs were required to earn foreign exchange themselves through export of software. This enabled them to get an idea of global markets very early. Besides formulating the national vision to promote software industry in India in the early 1980s by the government, there were deliberate attempt by the companies to promote software production like compilers, device drivers and operating system to cater to the domestic hardware sector. The high tariffs for the hardware sector had meant that the production of domestic hardware segment (including PCs which were introduced in the same period) had to be sustained requiring necessary software’s like operating system and drivers. Subsequently by mid 1980s, software started coming up unbundled with the hardware. This further gave fillip to the software industry and exports. The 1990s and early 2000 saw the rise of Software Technology Parks and formation of the Ministry of Information Technology, respectively. Despite liberalization of the 1991, the software industry flourished signifying the inherent strength that it developed due to benign and enabling environment provided over a period of time and also the fact that the 1990s saw the dramatic decline in telecommunication costs (government explicit intervention) and the commercialization of the internet along with the Y2K “problem”. The Data Envelopment Analysis (DEA) model is used to work out technical efficiency of Information and Communication Technology ( ICT) Industry in host of countries which are front runners as far as ICT is concerned. India lags behind the most as far as ICT (not IT) is concerned. However, information and Communication technology industry has brought revolution in India because it has reduced intermediation in business and society, provided solutions across sectors and is increasingly becoming an important tool for national development. DEA is also applied to benchmark the performance of the 92 Indian Software Companies for 2005- 2006. The impact of various determinants on technical efficiency of the Indian Software companies is worked out using tobit regression. The impact of the explanatory factors on net exports of 92 software firms in 2005-06 is also worked out using simple regression exercise. The study also works out technical efficiency of 36 telecommunication firms in India and examines the determinants for new technology adoption by such industries. The study uses a Malmquist index to estimate total factor productivity changes decomposed into efficiency change( catching up to the frontier technology) and technical change( movement of the frontier) for the common software firms existing between 1996 and 2006 E-government is the application of Information and Communication Technologies (ICT) by government agencies. Its use promises to enhance the effectiveness and efficiency of government and alter its relationship with the public. The study outlines E-Governance models for effective governance and for higher agricultural growth and development. E-Commerce primarily refers to buying, selling, marketing and servicing of products or services over internet and other computer networks. E-Commerce in India is just taking off with the advent of Railway and Online Air bookings and Net banking. The business is likely to grow to Rs 2300 crore by 2007 .Electronic commerce allows efficient interactions among customer, suppliers and development partners cutting down on transaction time and reducing the costs of doing business. The role of government is to facilitate the development of E-Commerce. For promoting South-South Cooperation and making it meaningful, the governments of the member countries need to pool resources and capabilities in R&D and human resource development for harnessing the fruits of Information and Communicating technologies. The study spells out in detail a number of examples where ICT has been used by rural communities for their benefit and for policy and development goals of the government in general. Web based software development and software product development (like device drivers) is necessary for providing complete business and consumer oriented solutions. These are also areas of interest for the Indian IT entrepreneurs to work upon in times to come. India’s relatively unsafe e-security environment is costing the BPO/ITES industry. The new IT Act (2000) needs to crucially define cyber harassment, phishing and cyber stalking to take care of cyber crimes in India. With the Indian IT/BPO exports to reach 60 billion by 2010, such companies need to invest in upgrading security measures for sustaining competitiveness. Organizations are not obliged under the IT Act to implement data security measures to protect consumers and clients. All this makes it obvious that qualitative progress cannot be made without enacting comprehensive data protection legislation. The Information and communication technologies (ICT) indicators of India are 13 million PCs, 40 million internet users- country with the fifth-largest number of Internet users,143 million mobile phones and 60 million subscribers for fixed lines in 2006. These are modest figures in comparison with the ICT penetration indicators achieved by the front runners like Taiwan, South Korea, Japan, UK, US, Nordic countries in Europe, among others (see the text for our strength and weaknesses in the ICT infrastructure in comparison with some other front runner countries). India’s Strengths lies in its availability of pool of scientists and engineers and quality of maths and science education along with quality of business schools. We are also ranked quite high in terms of cluster development, foreign technology licensing and Government prioritization of ICT. The weaknesses are the telecommunication infrastructure and speed of new business registration. However, Information and communication technologies(ICT) has brought about revolution in India particularly since 1990s .This is because it has reduced intermediation in business and society, reduced mobile and fixed telephony rates(because of concerted policy interventions by the government), provided solutions across sectors, provided both CDMA and GSM mobile technologies (and now Wi-Max technologies for internet access at different public places using PC), re-organizing firm level behavior, empowering individuals by providing them with more information and is increasingly becoming an important tool for national and rural development through E-governance, E-Banking and E- Commerce programmes. In addition, the success of the Information Technology industry in India is intertwined with information and communication technologies as most of the Information technology enabled services use such technologies for providing their services. The quantitative results of the paper answers the following- what orientations in inputs should be done by inefficient software and telecommunication firms and ICT Industry in general to reach the ‘ best practice frontier’( and have operational excellence), examines the relationship between technical efficiency and net exports of software firms along with the impact of host of explanatory factors like size of firms in terms of sales and total cost, among others on technical efficiency and net exports for cross section of software firms using tobit analysis, gives some reasons for relatively low ICT penetration in India and what can be done to transform India’s relatively good ICT readiness and ICT environment into higher ICT usage, answers why telecommunication firms are adopting new technologies and estimates total factor productivity changes in software firms which can be further used to model wage and price estimation of products and services offered by software firms over time. The paper confirms the improvements in productivity, efficiency change and technical change of the Indian Software industry from 1996 to 2006. Synopsis Chapter Wise Chapter one describes the major parameters of the Indian Information Technology (IT) Industry in India today and in the immediate past. The chapter further analyzes the reason for the ‘boom’ in the Indian IT sector. We also outline an electronic governance Model which can become a tool for effective governance. DEA is applied to benchmark the performance of the 92 Indian Software Companies for 2005- 2006. The impact of various determinants on technical efficiency of the Indian Software companies is worked out using tobit regression. The impact of the explanatory factors on net exports of 92 software firms in 2005-06 is also worked out using simple regression exercise. . Further this chapter uses a Malmquist index to estimate total factor productivity changes decomposed into efficiency change and technical change for the common software firms existing between 1996 and 2006. Chapter two gives an account of the position of the Indian Information Technology (IT) Industry and the Indian Information and Communication Technology (ICT) Industry in the global context and analyzes the strengths and weaknesses of ICT Infrastructure across some countries. Technical Efficiency of the Indian ICT sector is worked out using the mathematical model of Data Envelopment Analysis. The study also works out technical efficiency of 36 telecommunication firms in India and examines the determinants for new technology adoption by such industries. Chapter Three describes why and how the Indian IT industry can act as a catalyst of growth and development. An account of an effective electronic governance model for Agriculture Sector is also given. Chapter Four looks at the past of IT industry since 1960s keeping policy in mind. This chapter also outlines an export success model . Such models can be emulated by other countries. Chapter five describes the hurdles and constraints faced by the India IT industry and give an account of the policies and strategies which can be adopted to address the hurdles and concerns of the ICT sector. The last Chapter gives the conclusions, suggestions and policy advice for making IT as a tool for addressing some core inadequacies in the system like poverty, inequality, healthcare and education, among others.IT; ICT; ITPOLICY; OUTSOURCING; DEA ANALYSIS; TECHNICAL EFFICIENCY; TOBIT; NETEXPORTS; MALMQUIST INDEX; TOTAL FACTOR PRODUCTIVITY CHANGE; EFFICIENCY CHANGE; TECHNICAL CHANGE

Ex-ante evaluation of India’s trade alliance with Indo-Pacific region : a general equilibrium analysis

This study attempts to analyse the economy wide impact of Indo-Pacific alliance between India and rest of the 45 participating countries. We introduce four simulation scenarios in the general equilibrium model. First scenario is the one in which India bilaterally liberalizes trade in terms of tariffs liberalization alone and then removal of tariffs and reduction of non-tariff barriers together with all the countries of Indo-Pacific region. Second scenario is when India bilaterally liberalizes trade with all the Asian countries of the Indo-Pacific region. Third scenario is when India bilaterally liberalizes trade with all the countries of the Indo-Pacific region but excludes China from the region because of the current geo-political constructs. Fourth scenario is the one when free trade is considered among all the countries in the IndoPacific region. The paper uses the GTAP (Global Trade Analysis Project) model simulations for the analysis and the results reveal that for India the welfare gains in terms of equivalent variation and real GDP are maximum in the third simulation scenario. The article suggests a roadmap for maximum welfare gains for India keeping strategic and economic engagements with other member countries and sub-regions

Relative benefits/losses of India aligning with RCEP and BRICS countries under the conjecture of free trade area in goods

This is ARTNeT Working Paper No. 160, 'Relative benefits/losses of India aligning with RCEP and BRICS countries under the conjecture of free trade area in goods', by Somesh K. Mathur, Rahul Arora, and Monika Bhardwaj. The present study works out the relative benefits/losses of India aligning with RCEP and BRICS member countries under the conjecture of free trade area in good trade only. The study uses partial (SMART model) and general equilibrium (GTAP model) tools for this assessment. The main focus in the study is to compare the benefits/losses to Indian economy associated with both policy scenarios. The results reveal that it would be beneficial for India to align with other RCEP member countries under the policy of free trade area in goods trade. If India wants to join BRICS FTA in the near future then it must negotiate for the entry of its own specialized products into their markets and in reciprocity, it should allow the entry of their specialized products in to the domestic market. The results are in favor to make free trade area between RCEP countries which is more beneficial for India in comparison to make BRICS FTA

Absolute and Conditional Convergence: Its Speed for Selected Countries for 1961--2001

The study gives the theoretical justification for the per capita growth equations using Solovian model(1956) and its factor accumulation assumptions. The different forms of the per capita growth equation is used to test for 'absolute convergence' and 'conditional convergence' hypotheses and also work out the speed of absolute and conditional convergence for selected countries from 1961-2001.We use cross sectional data of GDP per capita levels and growth rates of European countries EU16(EU15 +United Kingdom), South Asian Countries (5), some East Asian (8) and CIS Countries (15) to test for 'absolute convergence' hypothesis for four different periods 1961-2001,1970-2001,1980-2001,1990-2001.Only EU and East Asian countries together have shown uniform evidence of absolute convergence in all periods. While EU as a region has shown significant evidence of absolute convergence in two periods, 1961-2001 and 1970-2001, there is no convincing statistical evidence in favor of absolute convergence in the last two periods: 1980-2001 and 1990- 2001.This latter evidence with declining rate of economic growth for EU since 1961 points to a challenge for designing EUs regional policies which also have to cope up with many East European and Baltic nations who joined EU recently. The speed of absolute convergence in the four periods range between 0.99-2.56 % p.a. (2% for the EU was worked out by Barro and Xavier Sala-i-Martin, 1995, for European regions) for EU while it ranges between 0.57-1.16 % p.a. for the countries in East Asia and EU regions together. However, there is no evidence of convergence among the South Asian countries in all periods and some major CIS republics since 1966.There is however tendency for absolute convergence among countries of South Asia, East Asia and European Union together particularly after the 1980s. Conditional convergence is prevalent among almost all pairs of regions in our sample except East Asian and South Asian nations together.Speed of conditional convergence ranges from 0.2 % in an year to 22%.In the European nations, the speed of conditional convergence works out be nearly 20 % unlike the speed of absolute convergence which hovered around 2 %.Such results would mean that countries in Europe are converging very quickly to their own potential level of incomes per capita but not so quickly to a common potential level of income per capita.The elasticity of output which is also estimated ranges from 0.54 to 0.91 implying that capital is to be interpreted as broad capital inclusive of human capital stock.It seems that human capital not only affects technological progress but affects output levels directly by increasing capital stock levels implying that the assumption of including human capital stock in the production function were appropriate in Mankiw,Romer and Weil(1992). The results for the speed of conditional convergence favors use of an extended Solovian model inclusive of human capital.Conditional beta convergence seems to be a better empirical exercise(as evident from our theoretical model and empirical results ) because it reflects the convergence of countries after we control for differences in steady states .Conditional convergence is simply a confirmation of a result predicted by the neoclassical growth model:that countries with similar steady states exhibit convergence.It does not mean that all countries in the world are converging to the same steady state,only that they are converging to their own steady statesGrowth equation, absolute convergence, conditional convergence, speed of absolute and conditional convergence, elasticity of output with respect to capital, half life of convergence

Growth Accounting for Some Selected Developing, Newly Industrialized and Developed Nations from 1966-2000: A Data Envelopment Analysis

We work out technical efficiency levels of 29 countries consisting of some selected South Asian, East Asian and EU countries using data envelopment analysis. Luxembourg has an efficiency score of one(most efficient) in all the years .Netherlands also has an efficiency score of one in 1966,1971,1976 and 1981.Japan,UK,Belgium,Ireland,Indonesia,Spain and Germany has an efficiency score of one in at least one of the years from 1966 to 2000.In the year 2000 though mean efficiency levels(without including life expectancy as input) of South Asian countries is higher than the European Union Countries and East Asian countries. Japan has the highest average efficiency followed by Hong Kong in the East Asian region in the period 1966-2000. We also decompose labor productivity growth into components attributable to technological changes (shifts in the overall production frontier), technological catch up or efficiency changes(movement towards or away from the frontier),capital accumulation(movement along the frontier) and human capital accumulation( proxied by life expectancy).The overall production frontier is constructed using deterministic methods requiring no specification of functional form for the technology nor any assumption about market structure or the absence of market imperfections. Growth accounting results tend to convey that for the East Asian and the South Asian countries efficiency changes(technological catch up) have contributed the most, while for the European countries it is the technical changes which has contributed to labour productivity changes between 1966-2000. We also analyze the evolution of cross country distribution for the 29 countries included in our sample using Kernel densities. It seems that there are other factors like trade openness,quality of governments,population rate of growth, savings rate, corruption perception indices, rule of law index, social capital and trust variables, formal and informal rules governing the society, among others, rather than the ones that are included below for the growth accounting exercise, which are primarily responsible for the existence of bimodal labour productivity distribution for countries included in our sample. However, from this growth accounting exercise, we do find that there is convergence in statistical terms of efficiency changes and human capital accumulation across countries of the EU, South Asian and East Asian regions.data envelopment analysis, growth accounting, technical efficiency, efficiency change, technological change, capital accumulation, human capital accumulation, kernel smoothing, cross country labor productivity distribution and counterfactual distributions

Industrial Sector Growth Accounting of Some Indian States and Union Territories: A Data Envelopment Analysis

We work out technical efficiency levels of the Indian States and Union Territories using Data Envelopment Analysis from 1980-81 to 1997-98. We decompose net value added per worker growth into components attributable to technological changes (shifts in the overall production frontier),technological catch up(movement towards or away from the frontier) and capital accumulation(movement along the frontier).The overall production frontier is constructed using data envelopment analysis, requiring no specification of functional form for the technology nor any assumption about market structure or the absence of market imperfections. We analyze the evolution of cross states net value added distribution for the 22 Indian states and union territories from 1980-81 to 1997-98 using Kernel densities. The efficiency factor accounted for 5.07 % only,technological change accounted for 11.66 % while the contribution of capital deepening is relatively higher at 17.82% while the point to point productivity change is of 11.66%. The overall averages provide evidence of productivity improvements of 173.29 over 1980-81(base) to 1997-98(current year) period.The efficiency factor accounted for -10.63% % only,technological change accounted for 173.20 while the contribution of capital deepening is 42.52% TO ACCOUNT for 173.20% overall PRODUCTIVITY CHANGE(not point to point). The results seems to suggest that there are other factors suggested in the literature like barriers to exit, a maze of rules and regulations, government import policies, high concentration, among others, rather than the ones that are included below for the growth accounting exercise which can totally account for point to point and overall productivity changes from 1980-81 to 1997-98..Also, we do find that the efficiency levels for the Indian states have gone down from what it was in 1980s to what it were in 1997-98.However,the smaller states have out performed the larger states in terms of their efficiency levels. Also, States which had relatively lower efficiency levels and net value added per worker in 1980-81 are the ones which have grown faster than other states. We see tendency of catching up among the Indian states in terms of net value added per worker..growth accounting, data envelopment analysis, technical efficiency, efficiency change, technological change, capital deepening,, kernel smoothing, cross country labor productivity distribution

Firm Heterogeneity and Trade Barriers – Analysis of India’s Trade

The paper attempts to analyse the affect of firm heterogeneity on India’s trade flows. It is based on Chaney model of firm heterogeneity on gravity structure. It says that firm heterogeneity distorts the gravity structure. The study is based on cross sectional data for the year 2009 and proves the effect of firm heterogeneity on gravity structure.Firm Heterogenity; Gravity Model; Distorted Gravity MModel; Chaney Model