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Testing the effect of investments in IT and R&D on labour productivity: New method and evidence for Indian firms

Rupika Khanna and Chandan Sharma

Economics Letters, 2018, vol. 173, issue C, 30-34

Abstract: 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.

Keywords: Information technology; Research & development; Production function estimation; Labour productivity (search for similar items in EconPapers)
JEL-codes: C33 D24 O3 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.econlet.2018.09.003

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