Thursday, May 23

Employment and TFP Impact of Technologies in the Developing World: Domestic versus Imported Expertise

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By Arup Mitra & Chandan Sharma

Working Paper No- 410

This study assesses the impact of technology import, input import, foreign ownership of the company and domestic innovation on productivity and employment. For this purpose, we analyze enterprises-level survey data for developing countries across the world. In terms of labour productivity, we noted that it varies inversely with all the three foreign sources. However, the combined effect of foreign technology and imported input on labour productivity is positive which may be indicative of the complementary relationship between the two. Turning to TFP the results are positive: foreign technology, imported inputs – whether measured in terms of dummy or the percentage of inputs imported from abroad – and the status of foreign ownership in the company all three raise the TFP. On employment the impact of foreign technology, imported inputs and foreign ownership is positive. Domestic innovation or research and development expenditure also results in higher levels of employment. Hence, foreign technology and better quality imported inputs can be beneficial for the firms as new opportunities may come up for expansion in activities though the joint effect on employment turns out to be negative.

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