An Application of Economic Capacity Utilization to the Measurement of TFPG from Non-Parametric Approach: Empirical Evidence from Manufacturing Sector of West Bengal: 1980-81 to 2010-11

Abstract

This paper attempts to measure productivity performance of the manufacturing sector of West Bengal during the period 1980-81 to 2010-11. In measuring total factor productivity growth a non-parametric approach, namely, Malmquist Data Envelopment Analysis has been used to estimate different performance measure. A comparative analysis between the pre (1980-81 to 1990-1991) & post liberalisation (1991-92 to 2010-11) era has also been made in this study. The paper also seeks to adjust malmquist total factor productivity growth (MTFPG) of manufacturing sector of the state of West Bengal with economic capacity utilization (CU). Our study shows overall negative TFP growth, though there is an increase in the rate of decline of TFPG from pre to post-liberalisation period. With adjustment for variations in Capacity Utilization, TFPG shows a positive and increasing trend during the post-reform period as compared to the pre-reform period. In a sense the liberalization process is found to have its adverse impact on total factor productivity growth (unadjusted with CU), but in case of TFPG adjusted with CU the manufacturing sector of West Bengal shows a significant positive growth. In a sense, the nature of impact of liberalization boils down to the adjustment of TFPG with CU.