Abstract
The purpose of the paper is to analyze the impact of economic liberalization on technical progress and technical efficiency of electronics hardware manufacturing firms in India. In this study, Translog stochastic frontier production function is estimated in order to measure technical progress and technical efficiency of firms in an era of economic liberalization. The results indicate that electronics hardware manufacturing firms in India have experienced a significant improvement in technical progress during 2002-2010 but the average level of technical efficiency of firms has declined during the same period. The study therefore, concludes that a number of firms have failed to appropriate the benefits of technical progress in India’s electronics industry. It has also been observed that implementation of the Information Technology Agreement (ITA) of World Trade Organization (WTO) does not have any significant impact on technical efficiency of firms operating in the electronics industry.
Highlights
In the year 2005, tariff rates on imported goods on a wide range of electronics products were reduced to zero due to the implementation of the Information Technology Agreement (ITA) of World Trade Organization (WTO)1
The frontier production function defined by the Equation (1) and the inefficiency model defined by the Equation (2) are estimated simultaneously by using the maximum likelihood estimation method for electronics hardware manufacturing firms
11Imports of capital goods and raw-material inputs are deflated by unit value indices (1999-00 = 100) of import of machinery and telecom, sound recording/reproducing apparatus &equipments respectively. 12R & D expenditure data are deflated by weighted average of wholesale price index (WPI) of machinery and machine tools and consumer price index (CPI) of industrial workers
Summary
In the year 2005, tariff rates on imported goods (known as “customs duty” in India) on a wide range of electronics products were reduced to zero due to the implementation of the Information Technology Agreement (ITA) of World Trade Organization (WTO). In the year 2005, tariff rates on imported goods (known as “customs duty” in India) on a wide range of electronics products were reduced to zero due to the implementation of the Information Technology Agreement (ITA) of World Trade Organization (WTO)1 This elimination of tariffs is likely to intensify competition in the electronics industry as it would result in the influx of cheaper imported electronic products. (2016) Impact of Economic Liberalization on Technical Efficiency of Firms: Evidence from India’s Electronics Industry. The competitiveness of a firm can be enhanced if there is an improvement in the level of technical efficiency
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