EVALUATING THE ELASTICITY OF SUBSTITUTION BETWEEN CAPITAL AND LABOUR (BOTH SKILLED AND UNSKILLED) IN THE INDIAN MANUFACTURING SECTOR

Arpit Gupta () and Kashika Arora
Additional contact information
Arpit Gupta: Department of Economics, Indian Institute of Foreign Trade, New Delhi, India

Review of Economic and Business Studies, 2024, issue 33, 81-102

Abstract: This study investigates the dynamics of the elasticity of substitution between capital and labour, both skilled and unskilled, across sixteen key industries in India's manufacturing sector. Employing a Constant Elasticity of Substitution (CES) production function and utilizing panel data spanning from 2001 to 2017, the research employs panel cointegration techniques to establish a long-term relationship between the variables. The study calculates long-run elasticity through FMOLS and DOLS estimators, revealing that in India's manufacturing sector, the elasticity of substitution between capital and skilled labour is higher compared to that between capital and unskilled labour, as consistently indicated by both estimators. These findings bear significant implications for industry-level resource allocation and labour market policies, suggesting a need for targeted strategies to enhance the integration and efficiency of skilled labour within the manufacturing sector.

Keywords: Elasticity of substitution; Factor mobility; CES production function (search for similar items in EconPapers)
JEL-codes: F10 F14 L60 O14 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://rebs.feaa.uaic.ro/articles/pdfs/358.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aic:revebs:y:2024:j:33:guptaa

DOI: 10.47743/rebs-2024-1-0004

Access Statistics for this article

More articles in Review of Economic and Business Studies from Alexandru Ioan Cuza University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Sireteanu Napoleon-Alexandru ().