Digital Transformation and Workforce Productivity: The Role of ICT in Enhancing Labour Productivity

Abstract:-
This paper investigates the relationship between investments in Information and Communication Technology (ICT) and labour productivity in 1,071 Indian manufacturing firms from 2000 to 2021. ICT investment is treated as a proxy for technology adoption at the firm level. The analysis reveals a significant effect of ICT expenditure on worker productivity over the past two decades. To capture heterogeneity, the results are further disaggregated by firm size, sector R&D intensity, and manufacturing sub-sectors. The analysis reveals that small firms exhibit relatively greater effects of ICT adoption on labour productivity. Those with medium to high R&D intensity experience significant gains in labour productivity from ICT adoption indicating the role of absorptive capacity of firms in benefiting from such investments. These findings can inform policy decisions for targeted interventions to facilitate the adoption of new and advanced technologies in specific sections of manufacturing firms.

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