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

Author

Listed:
  • 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.

Suggested Citation

  • Heshmati, Almas & Ncube, Mkhululi, 1998. "A Flexible Adjustment Model of Employment with Application to Zimbabwe's Manufacturing Industries," SSE/EFI Working Paper Series in Economics and Finance 278, Stockholm School of Economics, revised 15 Aug 2003.
    • Handle: RePEc:hhs:hastef:0278
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    References listed on IDEAS

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    1. 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, vol. 18(1), pages 79-102, July.
    2. 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.
    3. Nerlove,Marc, 2005. "Essays in Panel Data Econometrics," Cambridge Books, Cambridge University Press, number 9780521022460.
    4. 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, vol. 15(1), pages 119-130, February.
    5. Pindyck, Robert S & Rotemberg, Julio J, 1983. " Dynamic Factor Demands under Rational Expectations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(2), pages 223-238.
    6. Fallon, Peter R. & Lucas, Robert E. B., 1993. "Job security regulations and the dynamic demand for industrial labor in India and Zimbabwe," Journal of Development Economics, Elsevier, vol. 40(2), pages 241-275, April.
    7. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    8. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
    9. 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, vol. 77(2), pages 303-327, April.
    10. Kumbhakar, Subal C & Hjalmarsson, Lennart, 1995. "Labour-Use Efficiency in Swedish Social Insurance Offices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(1), pages 33-47, Jan.-Marc.
    11. Kumbhakar, Subal C. & Hjalmarsson, Lennart, 1998. "Relative performance of public and private ownership under yardstick competition: electricity retail distribution," European Economic Review, Elsevier, vol. 42(1), pages 97-122, January.
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    Cited by:

    1. Haouas Ilham & Yagoubi Mahmoud & Heshmati Almas, 2003. "Labor-use Efficiency in Tunisian Manufacturing Industiries," Review of Middle East Economics and Finance, De Gruyter, vol. 1(3), pages 1-20, December.
    2. Ilham Haouas & Mahmoud Yagoubi & Almas Heshmati, 2002. "Labour-Use Efficiency in Tunisian Manufacturing Industries: A Flexible Adjustment Model," WIDER Working Paper Series DP2002-103, World Institute for Development Economic Research (UNU-WIDER).
    3. 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, vol. 12(4), pages 683-720, December.

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    More about this item

    Keywords

    Dynamics; employment; labour-use efficiency; panel data; Zimbabwe's manufacturing; speed of adjustment;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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