Testing the effect of investments in IT and R&D on labour productivity: New method and evidence for Indian firms
2018
Khanna, Rupika | Sharma, Chandan
Utilizing a micro-level dataset of 900 firms for the period 2000–2016 from Indian manufacturing, this paper explores the effects of technological investments on labour productivity performance of firms by looking at investments in Information Technology (IT) and Research & Development (R&D). The present study is the first to assess the role of IT and R&D jointly for Indian manufacturing. To control for transmission bias in production function estimation, a GMM-based one step control function estimator is applied. We find large effects of both IT and R&D across various sub-samples. Further, our results imply that there is a complementarity between IT and R&D in generating labour productivity growth.
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