The main objective of this article is to see whether the production and employment in the Indian small scale industries have been drifting apart from each other in the long run. The empirical evidence based on the Augmented Dickey Fuller (ADF) test, cointegration analysis and error correction modeling, illustrates that production and employment in the Indian small scale industries are cointegrated, proving thereby, that the two have not been drifting apart from each other in the long run. The constant production elasticity of employment, based on log level series, is significantly positive but is less than unity, thus showing that economic growth is found to be less labor-intensive. More specifically, 1% increase in production is associated with an increase in employment by 0.3284% per annum in the small scale industries in India. The results, based on error correction modeling, demonstrate that the equilibrium error term in the short run is zero.
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Volume (Year): III (2006) Issue (Month): 1 (February) Pages: 52-59 Download reference. The following formats are available: HTML
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Handle: RePEc:icf:icfjie:v:03:y:2006:i:1:p:52-59
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