IDEAS home Printed from https://ideas.repec.org/a/dse/indecr/v37y2002i2p209-220.html
   My bibliography  Save this article

Labour Demand Function for the Indian Organized Industry An Instrument Variable Approach

Author

Listed:
  • Suresh Chand Aggarwal

    (Satyawati College, University of Delhi, Ashok Vihar, Delhi-110054, India)

Abstract

In most of the empirical writings regarding demand for labour in the Indian organized industry, scholars have estimated mostly gross employment-output elasticity for different sub-periods representing different decades. They have computed growth rates in output and employment by either the simple average for the period or by simple exponential method. Some authors have also obtained labour demand functions for the same sub-periods. The present paper is a departure from earlier studies in respect of, (i) the use of kink method to find out the growth rates for the sub-periods of structural breaks; (ii) testing the structural breaks with the help of CHOW test; (iii) testing the time series for stationarity; (iv) use of capital cost as an input in labour demand function; (v) the estimation of the function separately for production and non-production workers; and (vi) estimation of the functions with the help of Instrument Variable method. It has been observed that the kink method is the most appropriate for finding out growth rates. Instrument Variable method, which provides consistent estimates, gives higher values for short run elasticity and lower values for long run elasticity as compared to OLS. Therefore, any employment projections based on OLS estimates will be biased and have far reaching policy consequences.

Suggested Citation

  • Suresh Chand Aggarwal, 2002. "Labour Demand Function for the Indian Organized Industry An Instrument Variable Approach," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 37(2), pages 209-220, July.
  • Handle: RePEc:dse:indecr:v:37:y:2002:i:2:p:209-220
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aditya Bhattacharjea, 2006. "Labour Market Regulation and Industrial Performance in India--A Critical Review of the Empirical Evidence," Working papers 141, Centre for Development Economics, Delhi School of Economics.

    More about this item

    Keywords

    Structural Breaks; Kink Method; Labour Demand Function; Instrument Variable method; Employment elasticity;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dse:indecr:v:37:y:2002:i:2:p:209-220. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Pami Dua). General contact details of provider: http://edirc.repec.org/data/deudein.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.