Interpretation and Significance of Productivity Growth in Individual Industries: A Case Study of the Cement Industry in India

The focus is on the significance of the measure of productivity growth in the index form in individual industries operating under imperfectly competitive market environment. In general, these measures are dependent on a measure of changes in value added per unit of output, which is partly due to change in marginal cost conditions reflecting efficiency in resource use and partly due to differential increases in price of the product and marginal material cost conditions reflecting returns from market power. A divisia source of growth equation is used to measure the changes in valued added per unit of output which corrects the measure for any change in market power, and thereof allows the 'real' measure of productivity growth in tire index form. The corrected measure in turn forms the basis of a proper interpretation of productivity growth in terms of embodied technical change in the context of individual industries.