Productivity differences, technology adoption and economic growth : the case of India

When the acronym of ëBRICí was coined in 2001 by Jim OíNeill of Goldman Sachs, it was expected that economic growth rates in India, Brazil and Russia would eventually catch up with that of China. However, China has continued to outperform the other economies in the group, even after it was renamed ëBRICSí to reflect the inclusion of South Africa in 2010. The focus of this chapter is on one of the BRICS economies, namely India. Its aim is to examine from an economic perspective, why Indiaís performance has not lived up to expectations, and comment on the key challenges it faces in meeting them. We begin with some descriptive statistics regarding the progress of the Indian economy since 1990. While it has been growing at a rapid rate since the reforms it introduced in the1990s, there has been a slowdown in its overall GDP growth rates since 2008. The rate of growth experienced in the period 2003ñ07 was an average of 10.5 per cent. However, since the recession following the Global Financial Crisis (GFC) of 2008, the growth rate has fallen. From the period 2008ñ12 it has only registered an average growth rate of 6.5 per cent (World Bank, 2013). This chapter suggests that one of the major factors underpinning this slowdown is the performance of Indiaís agricultural sector. The importance of the agricultural sector is highlighted by the following stylized facts.

Economic growth, inequality and technology adoption in transitional economies

The stylized facts that motivate this thesis include the diversity in growth patterns that are observed across countries during the process of economic development, and the divergence over time in income distributions both within and across countries. This thesis constructs a dynamic general equilibrium model in which technology adoption is costly and agents are heterogeneous in their initial holdings of resources. Given the households‟ resource level, this study examines how adoption costs influence the evolution of household income over time and the timing of transition to more productive technologies. The analytical results of the model constructed here characterize three growth outcomes associated with the technology adoption process depending on productivity differences between the technologies. These are appropriately labeled as „poverty trap‟, „dual economy‟ and „balanced growth‟. The model is then capable of explaining the observed diversity in growth patterns across countries, as well as divergence of incomes over time. Numerical simulations of the model furthermore illustrate features of this transition. They suggest that that differences in adoption costs account for the timing of households‟ decision to switch technology which leads to a disparity in incomes across households in the technology adoption process. Since this determines the timing of complete adoption of the technology within a country, the implications for cross-country income differences are obvious. Moreover, the timing of technology adoption appears to be impacts on patterns of growth of households, which are different across various income groups. The findings also show that, in the presence of costs associated with the adoption of more productive technologies, inequalities of income and wealth may increase over time tending to delay the convergence in income levels. Initial levels of inequalities in the resources also have an impact on the date of complete adoption of more productive technologies. The issue of increasing income inequality in the process of technology adoption opens up another direction for research. Specifically increasing inequality implies that distributive conflicts may emerge during the transitional process with political- economy consequences. The model is therefore extended to include such issues. Without any political considerations, taxes would leads to a reduction in inequality and convergence of incomes across agents. However this process is delayed if politico-economic influences are taken into account. Moreover, the political outcome is sub optimal. This is essentially due to the fact that there is a resistance associated with the complete adoption of the advanced technology.

Disability and the labour market : an analysis of British males

This paper attempts, using data from the British Labour Force Survey 1996, to examine to what extent differences in labour market outcomes between able-bodied and disabled men may be attributed to differences in endowments of human capital and associated productivity differences. Both labour force participation and selectivity corrected human capital equations are estimated and decomposition techniques applied to them. Using the methodology of Baldwin and Johnson [Baldwin, M., Johnson, W.G., 1994. Labor market discrimination against men with disabilities. Journal of Human Resources, XXIX(1), Winter, 1–19], the employment effects of wage discrimination against the disabled are also estimated. Evidence of both substantial wage and participation rate differences between able-bodied and disabled men are found, which have implications for the operation of the 1995 Disability Discrimination Act.

Economic growth and inequality patterns in the presence of costly technology adoption and uncertainty

We develop a stochastic endogenous growth model to explain the diversity in growth and inequality patterns and the non-convergence of incomes in transitional economies where an underdeveloped financial sector imposes an implicit, fixed cost on the diversification of idiosyncratic risk. In the model endogenous growth occurs through physical and human capital deepening, with the latter being the more dominant element. We interpret the fixed cost as a ‘learning by doing’ cost for entrepreneurs who undertake risk in the absence of well developed financial markets and institutions that help diversify such risk. As such, this cost may be interpreted as the implicit returns foregone due to the lack of diversification opportunities that would otherwise have been available, had such institutions been present. The analytical and numerical results of the model suggest three growth outcomes depending on the productivity differences between the projects and the fixed cost associated with the more productive project. We label these outcomes as poverty trap, dual economy and balanced growth. Further analysis of these three outcomes highlights the existence of a diversity within diversity. Specifically, within the ‘poverty trap’ and ‘dual economy’ scenarios growth and inequality patterns differ, depending on the initial conditions. This additional diversity allows the model to capture a richer range of outcomes that are consistent with the empirical experience of several transitional economies.

Total factor productivity growth and convergence in the petroleum industry : empirical analysis testing for convexity

While economic theory acknowledges that some features of technology (e.g., indivisibilities, economies of scale and specialization) can fundamentally violate the traditional convexity assumption, almost all empirical studies accept the convexity property on faith. In this contribution, we apply two alternative flexible production technologies to measure total factor productivity growth and test the significance of the convexity axiom using a nonparametric test of closeness between unknown distributions. Based on unique field level data on the petroleum industry, the empirical results reveal significant differences, indicating that this production technology is most likely non-convex. Furthermore, we also show the impact of convexity on answers to traditional convergence questions in the productivity growth literature.

Diverse urban plantings managed with sufficient resource availability can increase plant productivity and arthropod diversity

Buildings structures and surfaces are explicitly being used to grow plants, and these “urban plantings” are generally designed for aesthetic value. Urban plantings also have the potential to contribute significant “ecological values” by increasing urban habitat for animals such as arthropods and by increasing plant productivity. In this study, we evaluated how the provision of these additional ecological values is affected by plant species richness; the availability of essential resources for plants, such as water, light, space; and soil characteristics. We sampled 33 plantings located on the exterior of three buildings in the urban center of Brisbane, Australia (subtropical climatic region) over 2, 6 week sampling periods characterized by different temperature and rainfall conditions. Plant cover was estimated as a surrogate for productivity as destructive sampling of biomass was not possible. We measured weekly light levels (photosynthetically active radiation), plant CO2 assimilation, soil CO2 efflux, and arthropod diversity. Differences in plant cover were best explained by a three-way interaction of plant species richness, management water regime and sampling period. As the richness of plant species increased in a planter, productivity and total arthropod richness also increased significantly—likely due to greater habitat heterogeneity and quality. Overall we found urban plantings can provide additional ecological values if essential resources are maintained within a planter such as water, light and soil temperature. Diverse urban plantings that are managed with these principles in mind can contribute to the attraction of diverse arthropod communities, and lead to increased plant productivity within a dense urban context.

Productivity is a poor predictor of plant species richness

For more than 30 years, the relationship between net primary productivity and species richness has generated intense debate in ecology about the processes regulating local diversity. The original view, which is still widely accepted, holds that the relationship is hump-shaped, with richness first rising and then declining with increasing productivity. Although recent meta-analyses questioned the generality of hump-shaped patterns, these syntheses have been criticized for failing to account for methodological differences among studies. We addressed such concerns by conducting standardized sampling in 48 herbaceous-dominated plant communities on five continents. We found no clear relationship between productivity and fine-scale (meters−2) richness within sites, within regions, or across the globe. Ecologists should focus on fresh, mechanistic approaches to understanding the multivariate links between productivity and richness.

Occupant health and productivity : an Australian perspective

The issue of whether improved building services such as air quality, provision of daylight, thermal comfort etc, have a positive impact on the health and productivity of building occupants is still an open question. There is significant anecdotal evidence supporting the notion that health and productivity of building occupants can be improved by improving the quality of the indoor environment, but there are actually few published quantitative studies to substantiate this contention. This paper reports on a comprehensive review of the worldwide literature which relates health of building occupants with the different aspects of the indoor environment which are believed to impact of these issues, with a particular focus on studies in Australia, The paper analyses the existing research and identifies the key deficiencies in our existing understanding of this problem. The key focus of this research is office and school buildings, but the scope of the literature surveyed includes all commercial buildings, including industrial buildings. There is a notable absence of detailed studies on this link in Australian buildings, although there are studies on thermal comfort, and a number of studies on indoor air quality in Australia, which do not make the connection to health and productivity. Many international studies have focused on improved lighting, and in particular the provision of daylight in buildings, but again there are few studies in Australia which focus in this area.