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A Flexible Adjustment Model of Employment with Application to Zimbabwe's Manufacturing Industries

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Author Info

  • Heshmati, Almas

    ()
    (Dept. of Economic Statistics, Stockholm School of Economics)

  • Ncube, Mkhululi

    (Dept. of Economics, Göteborg University)

Abstract

This paper presents a dynamic adjustment model of employment. The model is applied to a panel of ten Zimbabwean manufacturing industries observed over the period 1970-1993. The adjustment process is industry and time specific. The adjustment parameter is specified in terms of factors affecting the speed of adjustment. Industries are assumed to adjust their labour inputs towards a desired level of labour-use. A labour requirement function is specified in terms of observable variables and is used to model the desired level of labour-use. In evaluating alternative specifications, we used a flexible translog functional form where the labour requirement is a function of wages, output and capital stock. The empirical results show that in the long run, employment demand responds greatest to wages, followed by capital stock changes, and least by output. The sample mean annual speed of adjustment in employment is 33%. We further examined labour-use efficiency of different industries defined as the ratio of optimal to the observed level of employment. The rate of over-use of labour ranges across industries from 6.8% to 8.1% over the period of this study.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 278.

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Length: 20 pages
Date of creation: 06 Nov 1998
Date of revision: 15 Aug 2003
Publication status: Published as the book A Flexible Adjustment Model of Employment with Application to Zimbabwe's Manufacturing Industries, 2005, CEDAM.
Handle: RePEc:hhs:hastef:0278

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Keywords: Dynamics; employment; labour-use efficiency; panel data; Zimbabwe's manufacturing; speed of adjustment;

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References

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  1. John B. Knight, 1997. "Labour market policies and outcomes in Zimbabwe," CSAE Working Paper Series 1997-01, Centre for the Study of African Economies, University of Oxford.
  2. Subal Kumbhakar & Almas Heshmati & Lennart Hjalmarsson, 2002. "How Fast Do Banks Adjust? A Dynamic Model of Labor-Use with an Application to Swedish Banks," Journal of Productivity Analysis, Springer, Springer, vol. 18(1), pages 79-102, July.
  3. Pindyck, Robert S. & Rotemberg, Julio., 1982. "Dynamic factor demands under rational expectations," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 1351-82., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  4. Peter R. Fallon & Robert E. B. Lucas, 1989. "Job Security Regulations and the Dynamic Demand for Industrial Labor in India and Zimbabwe," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 2, Boston University, Institute for Economic Development.
  5. Kumbhakar, Subal C. & Hjalmarsson, Lennart, 1998. "Relative performance of public and private ownership under yardstick competition: electricity retail distribution," European Economic Review, Elsevier, Elsevier, vol. 42(1), pages 97-122, January.
  6. Baltagi, Badi H. & Griffin, James M., 1997. "Pooled estimators vs. their heterogeneous counterparts in the context of dynamic demand for gasoline," Journal of Econometrics, Elsevier, Elsevier, vol. 77(2), pages 303-327, April.
  7. Diewert, W E, 1974. "Functional Forms for Revenue and Factor Requirements Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 119-30, February.
  8. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  9. Kumbhakar, Subal C & Hjalmarsson, Lennart, 1995. "Labour-Use Efficiency in Swedish Social Insurance Offices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 10(1), pages 33-47, Jan.-Marc.
  10. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, Elsevier, vol. 65(1), pages 9-15, October.
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Cited by:
  1. Haouas, Ilham & Yagoubi, Mahmoud & Heshmati, Almas, 2003. "Labour-Use Efficiency in Tunisian Manufacturing Industries," IZA Discussion Papers 687, Institute for the Study of Labor (IZA).
  2. Jaan Masso & Almas Heshmati, 2004. "The optimality and overuse of labour in Estonian manufacturing enterprises," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 12(4), pages 683-720, December.
  3. Ilham Haouas & Mahmoud Yagoubi & Almas Heshmati, 2003. "Labour-Use Efficiency in the Tunisian's Manufacturing Industries: A Flexible Adjustment Model," Documents de travail, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV 79, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
  4. Haouas, Ilham & Yagoubi, Mahmoud & Heshmati, Almas, 2002. "Labour-Use Efficiency in Tunisian Manufacturing Industries: A Flexible Adjustment Model," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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