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Article
Publication date: 21 November 2023

Nabamita Dutta, Saibal Kar and Supratik Guha

According to the Government of India’s Ministry of Labour and Employment Report (2015), almost 90% of the Indian workforce can still be categorized as informally employed…

Abstract

Purpose

According to the Government of India’s Ministry of Labour and Employment Report (2015), almost 90% of the Indian workforce can still be categorized as informally employed, generating approximately 50% of the national product. Challenges with data availability have made a rigorous analysis of the informal economy in India often difficult and inadequate for policy formulations. This study aims to fill the gap by providing an empirical analysis of the informal economy in India using micro-data from the World Bank’s Informal Enterprise Surveys.

Design/methodology/approach

The authors contribute by empirically testing the association between the adoption of digital technology (payments) and firm performance proxied by firm sales. Matching models are used to mitigate sample selection bias arising out of simultaneous sample selection.

Findings

The results suggest that the participation in digital platforms, namely, use of digital payment instruments, is associated with higher sales for firms. The results of this study also show that adoption of digital payments helps in both situations – whether a firm has been using digital technology or has just started using it since the outbreak.

Research limitations/implications

More in-depth data over time, spanning across more cities of India, is needed to conduct a further detailed investigation.

Social implications

The results should allow policymakers in India to reconsider youth-centric and women-centric business needs, even within the informal sector, which does not often enter the purview of the government but remains responsible for the growth and sustenance of 90% of the country’s workforce. If further research on this issue could engage with the impact of demonetization of currency in 2016 as a lagged shock on sales and reestimate subsequent growth, it would perhaps offer a wider spectrum of how the performance of the informal economy in India affects the entire economy, which has over the last four years and before the onset of Covid reported slower growth.

Originality/value

Productivity is measured in terms of sales of informal firms in India in a regular month or in recent period like last month. Adoption of technology such as making payments using digital platforms can enhance productivity of firms by lowering standard transaction costs and time spent for visiting banks or financial institutions. Albeit not extensively, the literature has investigated digital technology adoption in the context of firms achieving comparative advantage (D’Ippolito et al. 2019; Scuotto et al. 2017), firms generating value creation (Magistretti, Dell’Era and Petruzzelli, 2019), and in helping with strategic initiatives and agility of firms (Ghezzi and Cavallo, 2018; Piccoli and Ives, 2005). Nonetheless, it would incur certain fixed costs, including acquiring skills and awareness, to manage digital platforms. In addition, physical access to instruments such as smartphones or computers and internet connectivity are prerequisites for productivity enhancements. Firms belonging to the informal sector in India generally face these challenges but may also benefit significantly following successful adoption. To the best of the authors’ knowledge, this is the first study to conduct a preliminary empirical analysis of the impact of digital technology adoption on the performance of informal sector firms in India.

Details

Indian Growth and Development Review, vol. 16 no. 3
Type: Research Article
ISSN: 1753-8254

Keywords

Article
Publication date: 5 September 2016

Nabamita Dutta and Sanjukta Roy

The purpose of this paper is to test the relationship between state fragility and transparency. A state is deemed fragile when it falters in its ability to manage conflict and in…

Abstract

Purpose

The purpose of this paper is to test the relationship between state fragility and transparency. A state is deemed fragile when it falters in its ability to manage conflict and in its capacity to deliver basic functions and implement public policy. Although minimizing fragility of the state is undoubtedly an integral component of economic development, there is a huge variation across countries in terms of where they stand with regard to fragility. Further, it also explores how educational attainment affects the relationship between state fragility and transparency.

Design/methodology/approach

Using several robust estimation methodologies and a relatively new database on transparency, the authors find that higher levels of transparency lower state fragility. They reply on fixed effect estimators, lagged one period and five periods and system GMM estimators as part of our identification strategy.

Findings

Using several robust estimation methodologies and a relatively new database on transparency, the authors find that a higher level of transparency lowers state fragility. Greater and free flow of information empowers the populace, restores trust in government, increases participation in the political arena and, thus, reduces state fragility. This paper additionally shows that higher educational attainment helps reap the benefits of transparency even more and, thus, catalyzes transparency to lower-state fragility more effectively.

Research limitations/implications

Our research shows that greater transparency leads to lower state fragility. Additionally, if the populace of the country has higher educational attainment, the benefits of transparency in reducing state fragility is enhanced. Although enhancing transparency amid high state fragility may be a challenging task, it can be achieved by providing the populace with better media access via internet and cell phones.

Originality/value

The authors use a relatively new database of transparency to show that transparency acts as an important determinant of state fragility. A state is deemed fragile when it falters in its ability to manage conflict and in its capacity to deliver basic functions and implement public policy. Given this definition, it is needless to say that what can affect state fragility and how can such fragility be lowered is an important research agenda. This paper aims to fill this gap. Additionally, it shows the importance of education while exploring such a relationship.

Details

International Journal of Development Issues, vol. 15 no. 3
Type: Research Article
ISSN: 1446-8956

Keywords

Article
Publication date: 7 November 2016

Nabamita Dutta, Russell S. Sobel and Sanjukta Roy

Existing literature has expressed significant pessimism about the outcomes of foreign aid received by developing nations. Foreign aid can lead to negative outcomes by generating…

Abstract

Purpose

Existing literature has expressed significant pessimism about the outcomes of foreign aid received by developing nations. Foreign aid can lead to negative outcomes by generating greater rent-seeking opportunities and creating aid dependence. While aid’s negative impact has been explored in the context of growth, political institutions, and economic institutions, the literature has not investigated the effect of aid on business climate of recipient nations. The purpose of this paper is to explore foreign aid’s impact on government regulations on the business climate in Sub-Saharan African (SSA) and Middle East and North American countries.

Design/methodology/approach

The authors consider a panel of 64 countries over six years. Since foreign aid is most likely to be endogenous, as identified in most studies, the identification strategy follows two methodologies – system GMM estimator, that creates its own instruments via moment generating conditions and instrumental variable approach that relies on an external instrument.

Findings

The authors find that aid worsens the business climate by increasing government restrictions. Foreign aid provides the recipient governments and the political elite resources to strengthen their power and reinforce predatory policies that are harmful for the business climate. The results further show that in the presence of long-lasting and sustainable democratic regimes, the negative impact of foreign aid on business climate mitigates to a certain extent.

Originality/value

While aid’s negative impact has been explored in the context of growth, political institutions, and economic institutions, the literature has not investigated the effect of aid on business climate of recipient nations. The authors explore the impact of foreign aid on government regulations on the business climate in SSA and Middle East and North American countries.

Details

Journal of Entrepreneurship and Public Policy, vol. 5 no. 3
Type: Research Article
ISSN: 2045-2101

Keywords

Article
Publication date: 7 October 2013

Nabamita Dutta, Russell S. Sobel and Sanjukta Roy

Previous literature has clearly demonstrated the need for sound government policies or “institutions” to promote and support entrepreneurship in a country. The purpose of this…

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Abstract

Purpose

Previous literature has clearly demonstrated the need for sound government policies or “institutions” to promote and support entrepreneurship in a country. The purpose of this paper is to explore the role of one such institution – political stability – in boosting entrepreneurial endeavors. A politically stable nation will have lower risk and transaction/contracting costs, and higher levels of government transparency, predictability, and accountability. Thus, the paper should expect that with greater political stability there should be a greater degree of entrepreneurial activity.

Design/methodology/approach

Using dynamic panel estimators (System GMM estimators) and considering multiple proxies of political risk, our results confirm this hypothesis. Such estimators handle challenges associated with panel data efficiently.

Findings

The paper's results show that greater political stability for a country does indeed lead to an increased rate of entrepreneurship and wealth creation.

Originality/value

Entrepreneurship is critical to the process of economic growth and development. To prosper, countries must unleash the creative talents of their citizens through the decentralized process of formal private sector entrepreneurship. New legal businesses create jobs, opportunities, wealth, and goods and services that make a nation grow. Sadly in many nations, this process is stifled and poverty is the result. While previous research has examined which types of specific policies matter for promoting entrepreneurship, the paper considers the different question of how the stability of political institutions impacts the rate of entrepreneurship.

Details

Journal of Entrepreneurship and Public Policy, vol. 2 no. 2
Type: Research Article
ISSN: 2045-2101

Keywords

Article
Publication date: 13 April 2015

Nabamita Dutta and Deepraj Mukherjee

During recent times, the stock market has emerged as a major financial institution of an economy. Yet, cross-country differences, in size and role of stock market, persist. The…

Abstract

Purpose

During recent times, the stock market has emerged as a major financial institution of an economy. Yet, cross-country differences, in size and role of stock market, persist. The purpose of this paper is to investigate the correlation between cultural traits and the development of the stock market in a country. Considering multiple dimensions of culture, identified in the literature by Hofstede (1980/2001) and World Value Survey, the authors construct the hypotheses: trust, a key cultural trait, should positively influence stock market development; uncertainty avoidance, Hofstede’s cultural dimension should negatively influence the development of the stock market; and individualism, an alternate cultural dimension of Hofstede’s measures, should be positively correlated with stock market development. The cross-country empirical analysis supports the hypotheses. The results hold for multiple measures of stock market development.

Design/methodology/approach

This paper investigates the correlation between various cultural traits and the development of the stock market in a country. Specifically, the authors consider three different cultural trait measures. The authors consider a cross-sectional analysis of an extensive number of countries. While all explanatory variables of interest are considered over the period 2000-2007, the authors consider 2008 figures for the dependent variables of interest, financial development. Ordinary least squares is considered as the benchmark specification. Robust regression has been considered as part of robustness analysis. The authors mention throughout the paper that the results stress on significant association between the variables, only.

Findings

The empirical results support the hypotheses. The first measure, trust, is positively associated with stock market development of a nation. Statistically, for one standard deviation rise in trust (1 SD=37.5), stock market capitalization will go up between 11 and 19 percentage points. Uncertainty avoidance, the second measure is negatively correlated and statistically, the impact is much greater. Finally, the third measure, individualism, is positively correlated with stock market development. Statistically, for one SD rise in individualism (SD=23.9), stock market capitalization will rise by 23 percentage points.

Originality/value

Existing literature has stressed the role of cultural traits – trust, uncertainty avoidance, individualism – in the promotion of entrepreneurship, innovation and growth. Since most startups need to raise capital in order to implement their new ideas, cross-country heterogeneity in the strength of capital markets may lead to important differences in entrepreneurship and productivity growth across economies (Greenwood and Jovanovic, 1990; Jayaratne and Strahan, 1996; Levine, 1997; Beck et al., 2000; Guiso et al., 2004). Yet, the link between stock market development and cultural traits has not been established in the literature. This paper aims to fill this missing link.

Details

Journal of Entrepreneurship and Public Policy, vol. 4 no. 1
Type: Research Article
ISSN: 2045-2101

Keywords

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