Chapter 3: Analysis of Efficiency and Total Factor Productivity Growth of Indian Pharmaceutical Industry Using Firm-Level Data

This chapter estimates the efficiency of the IPI using non-parametric method of data envelopment analysis (DEA) approach. For doing that it measures output-oriented technical efficiency (TE) of IPI considering each firm as a decision-making unit. Also, the factors behind the variation in TE are identified using panel regression. It also estimates total factor productivity growth (TFPG) of the IPI. For doing that it measures TFPG considering each firm as a decision-making unit using non-parametric method of DEA approach. Also, the major factors responsible for variation in TFPG of IPI are found using panel regression. This chapter then compares the efficiency and productivity of IPI. For performing that it compares TE and TFPG of IPI. This chapter also tries to identify the common factors responsible for changes in these two performance indicators, i.e. TE and TFPG. Another important contribution of this chapter is that it verifies the presence of structural breaks (which may appear due to changes in economic regime over time) in the TFPG series at the firm level by using panel structural break methodology.