Table 9.1: INDIA, Extended production function and comparison of ICA method with EM algorithms

|**Dependent va**|**riable: Log of total sales**||<sup>**1**</sup>||**EM Algorithms**<sup>**2**</sup>||
|---|---|---|---|---|---|---|
|||**ICA Meth**|**od**|**[1]**|**[2]**|**[3]**|
|**Category**|**Variable**|**Coeff.**<br>**std. err.**|**Boot. s.e**|**Coeff.**<br>**std. err.**|**Coeff.**<br>**std. err.**|**Coeff.**<br>**std. err.**|
|PF variables|Log-employment|0.1027<br>[0.0341]***|<br>(0.0306)***|0.0976<br>[0.0331]***|0.0516<br>[0.0250]**|0.0527<br>[0.0250]**|
||Log-materials|0.7989<br>[0.0185]***|<br>(0.0462)***|0.8362<br>[0.0186]***|0.8607<br>[0.0176]***|0.8628<br>[0.0177]***|
||Log-capital|0.0676<br>[0.0239]***|(0.0153)***|0.0629<br>[0.0225]***|0.0537<br>[0.0146]***|0.0502<br>[0.0147]***|
|Infrastructure|Longest # ofdays to clearcustomsforexports (a)|-0.0125<br>[0.0263]|(0.0376)|-0.0039<br>[0.0275]|-0.0158<br>[0.0209]|-0.0156<br>[0.0208]|
||Dummyforowngenerator|0.0538<br>[0.0422]|(0.0424)|0.0378<br>[0.0396]|0.015<br>[0.0247]|0.0131<br>[0.0249]|
||Watersupplyfrompublic sources (b)|0.0014<br>[0.0005]***|<br>(0.0008)*|0.0013<br>[0.0004]***|0.0009<br>[0.0003]***|0.0008<br>[0.0003]**|
||Shipmentlossesinthe domesticmarket (b)|-0.0047<br>[0.0039]|(0.0128)|-0.0023<br>[0.0035]|-0.0017<br>[0.0030]|-0.0016<br>[0.0030]|
||Dummyforowntransport|0.0238<br>[0.0475]|(0.0861)|-0.0084<br>[0.0464]|-0.003<br>[0.0340]|-0.0023<br>[0.0341]|
||Dummyfor web page|0.0402<br>[0.0394]|(0.0264)|0.0047<br>[0.0378]|0.0013<br>[0.0310]|0.0008<br>[0.0313]|
||Dummy for security|0.0467<br>[0.0423]|(0.1407)|0.0426<br>[0.0403]|0.0497<br>[0.0285]*|0.0505<br>[0.0285]*|
|Red tape,|Salesreportedfortaxes (b)|0.0006<br>[0.0014]|(0.0052)|0.0009<br>[0.0013]|0.0008<br>[0.0010]|0.0009<br>[0.0010]|
|corruption and|Workforcereportedfortaxes (b)|-0.0015<br>[0.0012]|(0.0042)|-0.0015<br>[0.0010]|-0.0009<br>[0.0008]|-0.0009<br>[0.0008]|
|crime|Dummyforpayments to speed up bureaucracy|-0.0464<br>[0.0336]|(0.0526)|-0.0443<br>[0.0292]|0.0041<br>[0.0255]|0.0083<br>[0.0259]|
||Dummyfor interventionistlabor regulation|-0.036<br>[0.0361]|(0.0211)*|-0.0317<br>[0.0340]|-0.0259<br>[0.0330]|-0.028<br>[0.0331]|
||Absenteeism (b)|-0.0299<br>[0.0222]|(0.0571)|-0.0204<br>[0.0195]|-0.0069<br>[0.0156]|-0.0071<br>[0.0160]|
|Finance and|Dummyfortrade association|0.0785<br>[0.0455]*|(0.0456)*|0.0756<br>[0.0408]*|0.024<br>[0.0297]|0.0194<br>[0.0300]|
|corporate|Working capital financed by domestic private banks (b)|0.0002<br>[0.0007]|(0.0005)|-0.0002<br>[0.0007]|0.0003<br>[0.0006]|0.0003<br>[0.0006]|
|governance|Dummyforexternalaudit|0.0691<br>[0.0395]*|(0.0452)|0.0662<br>[0.0362]*|0.0633<br>[0.0283]**|0.0655<br>[0.0282]**|
||Dummy for loan (b)|0.1102<br>[0.0473]**|(0.0637)*|0.0892<br>[0.0464]*|0.0121<br>[0.0331]|0.006<br>[0.0327]|
|Quality,|Dummyfor R&D(a)|0.1787<br>[0.2382]|(0.2347)|0.2041<br>[0.2534]|0.0702<br>[0.1322]|0.0638<br>[0.1320]|
|innovation and|Dummyforproductinnovation|-0.0073<br>[0.0360]|(0.0710)|-0.0153<br>[0.0332]|-0.025<br>[0.0244]|-0.0265<br>[0.0246]|
|labor skills|Dummyfor foreign license (b)|0.204<br>[0.1053]*|(0.1302)|0.1425<br>[0.1033]|0.086<br>[0.0847]|0.0801<br>[0.0852]|
||Dummyfor internaltraining (b)|0.0579<br>[0.0533]|(0.0516)|0.0578<br>[0.0511]|0.0702<br>[0.0443]|0.0703<br>[0.0442]|
||Unskilledworkforce (a)|0.0013<br>[0.0036]|(0.0016)|0.0013<br>[0.0036]|-0.0034<br>[0.0030]|-0.0039<br>[0.0031]|
||Workforce with computer|0.0017<br>[0.0011]|(0.0015)|0.0016<br>[0.0010]|0.0012<br>[0.0009]|0.0011<br>[0.0008]|
|Other control|Dummyfor incorporated company|0.0265<br>[0.0396]|(0.0901)|0.0162<br>[0.0368]|0.0272<br>[0.0301]|0.0261<br>[0.0300]|
|variables|Age|0.0534<br>[0.0267]**|(0.0214)**|0.0438<br>[0.0251]*|0.0456<br>[0.0174]**|0.0487<br>[0.0174]***|
||Share ofexports (b)|0.001<br>[0.0009]|(0.0005)**|0.0006<br>[0.0009]|0.00004<br>[0.0006]|-0.0001<br>[0.0006]|
||Trade union(b)|0.0008<br>[0.0012]|(0.0010)|0.0008<br>[0.0012]|0.0009<br>[0.0009]|0.0007<br>[0.0009]|
||Strikes (b)|-0.0683<br>[0.0449]|(0.0821)|-0.0475<br>[0.0380]|-0.0112<br>[0.0307]|-0.0107<br>[0.0314]|
||Constant|0.7377<br>[0.3449]**||0.4456<br>[0.3504]|1.0108<br>[0.2499]***|1.0335<br>[0.2492]***|
||Industry/region/size/time dummies|Yes||Yes|Yes|Yes|
||Observations|5211||5216|5175|5176|
||R-squared|0.88||0.9|0.94|0.94|

Estimating results of equation (1) under different imputation mechanisms for missing data. Those observations with missing values in all sales, labor (labor cost), materials and capital are excluded in all the regressions.

1 ICA method is in section 3 of main text. Significance is given by clustered and White-robust standard errors in brackets; *** 1%, **5%, * 10%. In parentheses are bootstrap standard errors after 1000 replications (see section 5.2.2 on the motivation of using bootstrap standard errors). Correlation by clusters is also considered.

2 EM algorithms are explained in section 5.1. EM alg [1] includes as covariates of the imputation mechanism industry/region/size/time (I/R/S/T) dummies (see section 5.1.1); EM alg [2] includes I/R/S/T dummies and production function variables (see section 5.1.2); EM alg [3] also includes a set of IC variables (see section 5.1.3). Significance is given by clustered White-robust standard errors. (a) IC variables instrumented with industry/region average variables. (b) missing values in IC variables replaced by means of ICA method. Source: Authors’ calculations with ICSs 64