Capital Labour Substitution in the Large-scale Food-processing Industry in Pakistan: Some Recent Evidence
Food-processing is one of the first industries developed by man. Most agricultural commodities require some sort of processing for them to be edible. In primitive societies man processed his own food using the simple mortar and pestle. With the advent of industrialisation there emerged important implications for foodprocessing technologies. The workers in the industrial and commercial sectors of urban areas required greater supplies of food. This encouraged the establishment of processing plants supplemented by storage facilities to ensure that the urban population received the food that they required. Food-processing, therefore, began to occupy a fairly predominant position in the overall industrial sector. Its importance was heightened by its strong backward and forward linkages with the rest of the economy. In a labour-surplus developing economy, where most of the labour is unemployed or underemployed, the absorption of this surplus labour force in the industrial sector is an important issue. In recent decades, there has been significant growth in the industrial sector in most developing countries, in terms of both
Estimation of Elasticities of Substitution for CES Production Functions using Data on Selected Manufacturing Industries in Pakistan
Firm-level stochastic CES production functions are specified for large- and small-scale firms in twelve manufacturing industries in Pakistan. Assuming that firms within specified asset-size categories for which aggregative data are available have the same levels of productive inputs, the elasticities of substitution of labour for capital are estimated, using weighted least-squares regression. For large-scale firms, the estimated elasticities are generally not significantly different from one, whereas for small-scale firms the elasticities are significantly smaller than one but greater than zero. These results indicate that there may exist more possibilities for the substitution of labour for capital in manufacturing industries in Pakistan than were claimed by earlier researchers. This finding has important policy implications for Pakistan's economic development.
THE DEMAND FOR DOMESTICALLY PRODUCED SAWN TIMBER: AN APPLICATION OF THE DIEWERT COST FUNCTION
The Australian demand for domestically-produced sawn timber is investigated by considering its major use - as an input into residential construction. Using a cost function approach, a system of equations is derived expressing quantities demanded in terms of relative prices. Cross-price elasticities are estimated and the falling input-output ratio of timber in residential construction is analysed by decomposing the change in this ratio into price, outputs and taste/technology effects. A major finding is that, while substitution of timber for other inputs has been encouraged through relative price movements, this effect has been more than offset by taste and technology trends away from timber usage.