Services input and productivity in Indian manufacturing plants

Bishwanath Goldar

Indian Growth and Development Review, 2019, vol. 13, issue 1, 99-124

Abstract: Purpose - The purpose of this paper is to analyse econometrically determinants of total factor productivity (TFP) in Indian manufacturing plants with a focus on the influence of services input on productivity. Design/methodology/approach - Plant-level data drawn fromAnnual Survey of Industriesfor the years 1998-1999 to 2012-2013 are used for the estimation of TFP at plant-level by applying the Levinsohn–Petrin methodology. Econometric models are estimated to explain variations in plant-level TFP. The explanatory variables used are services input intensity (split into manufacturing services purchased and other services), the share of information communication technology (ICT) assets in total fixed capital stock, the share of contract workers in total workers and the share of imported materials out of total materials used, with plant size taken as a control variable. Model estimation is done by applying the fixed effects model. Findings - Econometric results indicate that services input and ICT intensity have a significant positive effect on productivity of manufacturing plants in India. Use of imported materials raises productivity, whereas the use of contract workers in place of regular workers tends to lower productivity. The impact of imported materials on TFP of manufacturing plants seems to be relatively bigger for labour-intensive, low technology industries. Originality/value - Care has been taken for TFP measurement. Analysis of the impact of services input on TFP has been undertaken for Indian manufacturing using plant-level data for the first time.

Keywords: Services input; Manufacturing services; Information communication technology; Total factor productivity; Indian manufacturing; D24; L60; L80; O14; O33 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:igdrpp:igdr-11-2018-0117

DOI: 10.1108/IGDR-11-2018-0117

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