ICT Adoption in Micro and Small Firms: Can Internet Access Improve Labor Productivity?

Abstract

This paper analyzes the impact of internet adoption on labor productivity in Peruvian micro and small manufacturing firms over the period 2011-2013. Instrumental variables estimates show that internet adoption: (i) increases firms’ labor productivity; (ii) reallocates employment away from temporary administrative workers and non-remunerated workers and expands employment of permanent production workers; (iii) leads to the formalization of labor relationships, to the implementation of new organizational practices, and to the improvement of training measures. These findings point to the implementation of combined policies, where ICT expansion is accompanied by the development of digital skills.

Keywords: internet adoption, labor productivity, micro and small firms, employment structure, organizational practices

JEL Classification: J230, J240, O320, O330