Effect of firm ownership on productivity: empirical evidence from the Indian mining industry

Abstract

This paper empirically examines the difference in productivity existing between the public and private sector of the mining industry in India. The literature on the effect of firm ownership on productive efficiency stands highly divided; hence, in this context, our study adds to the literature by attempting to study the effect of firm ownership on total factor productivity (TFP) in the four sectors of the Indian mining industry from 2000 to 2016. Here, we have sought to compare the productivity difference between the public and private mining firms in the four sectors, namely metallic, non-metallic, coal and petroleum. This paper uses the Levinson and Petrin (LP) method for estimating the TFP of each firm. The results indicate the superiority of private firms in three sectors—metallic, non-metallic, and coal—whereas the petroleum sector reports quite the opposite result. The results raise questions about the stability of the public sector firms over time. Overall, the paper suggests measures like provision of incentives, improvement in infrastructural facilities, upgradation of manpower and so on to improve the productivity performance of public sector firms.