“Export as a driver of productivity: Myth or Reality?”

Abstract

This study analysis firm level productivity in the Indian Automobile sector for the period 2014-2024 with the help of panel data for 1864 firms. Total factor productivity in the sector is estimated with Levinsohn -Petrin model, and robustness checks are done by Ackerberg -Frazer model and Wooldridge model. The study shows the variations in productivity like in Levinsohn- Petrin model it reflects absolute productivity levels while ACF and Wooldridge gives estimation for relative efficiency. The analysis reveals exports as the most robust and consistent determinant of productivity I the automobile sector which follows learning by doing hypothesis. It also analysis heterogeneity across industry segments. Scale based productivity in OEM’s input efficiency in component manufacturers. Trends analysis shows a break with the Covid-19 shock in 2020, but the sector recovered by 2024 which reflects restructuring, flexibility and adaptability. The results shows that the emphasis should be on external market exposure as a determinant of productivity, compared to internal characteristics of firms in the sector.