Private Investment in Human Capital and Industrial Development
Private Investment in Human Capital and Industrial Development
The Case of the Indian Software Industry*
This chapter explores the role of human capital in the regional location of the software industry, focusing on private investment in the software exports industry of India during 1990–2003. The data support the significant effect of human capital on the growth of software exports even when other relevant factors are controlled. Pronounced differences in stocks of relevant human capital (that is, engineers) across Indian states have driven software exports from these states. The bulk of inter-state variations cannot be explained by the willingness of states to invest in engineering colleges. Instead, states which allowed private engineering colleges to enter early gained an early advantage that has persisted for almost fifteen years. In addition, the regional growth of the software exports industry is associated with the initial as well as current size of the electronics hardware industry.
Keywords: software industry, India, human capital, engineers, engineering colleges, software exports industry, private investment
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