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Services input and productivity in Indian manufacturing plants

Services input and productivity in Indian manufacturing plants 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/approachPlant-level data drawn from Annual Survey of Industries for 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.FindingsEconometric 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/valueCare 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Indian Growth and Development Review Emerald Publishing

Services input and productivity in Indian manufacturing plants

Indian Growth and Development Review , Volume 13 (1): 26 – Apr 22, 2020

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References (69)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1753-8254
DOI
10.1108/igdr-11-2018-0117
Publisher site
See Article on Publisher Site

Abstract

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/approachPlant-level data drawn from Annual Survey of Industries for 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.FindingsEconometric 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/valueCare 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.

Journal

Indian Growth and Development ReviewEmerald Publishing

Published: Apr 22, 2020

Keywords: Services input; Manufacturing services; Information communication technology; Total factor productivity; Indian manufacturing; D24; L60; L80; O14; O33

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