Productivity Growth and Convergence Across Firms: A Case Study of India's State Transport Undertakings During 2000s

Abstract

The motive of this study is to put forward new information concerning the productivity and productive efficiency of the State Road Transport Undertakings (STUs) in India during 2000s. A well-known multilateral index procedure proposed by Caves, Christensen, and Diewert (1982) is used to compute the growth and relative levels of total factor productivity of the STUs. Productive efficiency estimates are then calculated by separating the effects of variations in the variables beyond managerial control from the total factor productivity measures. We also examined the temporal relationship of the cross-sectional rankings of individual STUs’ productive efficiency estimates. To address this issue, we calculated Kendall’s index of rank concordance along with coefficient of variation of productive efficiency estimates for the sample period. Annual data for a sample of eleven STUs that operated during the period 2000-01 to 2010-11 are used for the purpose of estimation. We find that there is a wide disparity among STUs according to their total factor productivity and productive efficiency levels and growth. Although not very strong, there is a positive relationship between total factor productivity and size of STUs. However, productive efficiency and size of STUs has statistically insignificant relationship, which shows that the productive efficiency of STUs is independent of their size. Comparing productive efficiency with the total factor productivity, it is found that within a firm, productive efficiency has a much larger spread whereas, inter-firm spread is less in case of productive efficiency. Using regression analysis, we found that although the coefficient of variation of productive efficiency estimates is decreasing over time, but decrease is statistically insignificant. According to multi-annual Kendall index, the null hypothesis of no association between productive efficiency ranks is rejected. However, according to binary-Kendall index, the null hypothesis could not be rejected for all the years. In other words, cross-sectional dispersion of STUs’ productive efficiency is diminishing over time but not significantly.

Keywords: Productivity, Bus Transport, State Transport Undertakings, India