Asymmetric adjustments between energy and labour efficiencies in India: new evidence using sectoral panel data analysis

This study aims to investigate the asymmetric adjustments between energy and labour efficiencies for India, using panel data for 45 major sectors over the period 2000–2014. A theoretical model is formulated to establish the possible linkages between energy and labour efficiencies. Next, the panel Stochastic Frontier Approach is employed to estimate energy and labour efficiencies across sectors. Furthermore, a nonlinear panel autoregressive distributed lag model is estimated to uncover the short-run and long-run asymmetric effects between energy and labour efficiencies. The panel Stochastic Frontier Approach estimates show an infinitesimal change in average energy efficiency (EE) during the study period, except for 2008–2010. In contrast, the average labour efficiency (LE) trend shows an inverted U-shaped pattern. The aggregate India and sub-group specific asymmetric impact of EE on LE and vice-versa provide mixed results. For aggregate India, asymmetric impacts of positive and negative shocks in EE on LE are visible in both the short and long-run. However, asymmetric impacts of positive and negative shocks in LE on EE are only noticeable in the short-run. Likewise, for sub-group-specific analysis, it is observed that asymmetric impacts of positive and negative shocks in EE on LE are evident in all the high, medium, and low-tech sectors in the long-run. But in the short-run, the asymmetric impact of EE on LE is only observed for medium-tech sectors. Furthermore, the asymmetric effects of positive and negative shocks in LE on EE are evident for all three sub-groups only in the long-run.