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Capital-Skill Complementarity: Evidence from Manufacturing Industries in Ghana

  • Akay, Gokhan H.


    (Trinity University)

  • Yuksel, Mutlu


    (Dalhousie University)

Using U.S. manufacturing data, Griliches (1969) found evidence suggesting that capital equipment was more substitutable for unskilled than skilled labor. Griliches formulated this finding as the capital-skill complementarity hypothesis. The purpose of this study is to determine whether the capital-skill complementarity framework holds for Ghana manufacturing plants in industry and aggregate level. We use an unbalanced panel of plant-level data for manufacturing firms in Ghana during the 1991 and 1997 in four industries (food-bakery, textiles-garments, wood-furniture and metal-machinery). Our findings suggest that capital-skill complementarity holds in aggregate level and wood-furniture sector in Ghana. However, we reject the capital-skill complementarity hypothesis for food-bakery, textile-garment and metal-machinery sectors.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4674.

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Length: 23 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4674
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  1. Francis Teal, 1997. "Real wages and the demand for skilled and unskilled male labour in Ghana's manufacturing sector: 1991-1995," CSAE Working Paper Series 1997-10, Centre for the Study of African Economies, University of Oxford.
  2. Joy Mazumdar & Myriam Quispe-Agnoli, 2004. "Can capital-skill complementarity explain the rising skill premium in developing countries? evidence from Peru," FRB Atlanta Working Paper 2004-11, Federal Reserve Bank of Atlanta.
  3. Francis Teal, 1997. "Real wages and the demand for skilled and unskilled male labour in Ghana`s manufacturing sector: 1991-1995," Economics Series Working Papers WPS/1997-10, University of Oxford, Department of Economics.
  4. Arne Bigsten & Paul Collier & Stefan Dercon & Bernard Gauthier & Jan Willem Gunning & Anders Isaksson & Abena Oduro & Remco Oostendorp & Catherine Pattillo & Måns Söderbom & M. Sylvain & Francis Teal , 1997. "Investment in Africa's manufacturing sector: A four country panel data analysis," CSAE Working Paper Series 1997-11, Centre for the Study of African Economies, University of Oxford.
  5. Chris Papageorgiou & John Duffy & Fidel Perez-Sebastian, . "Capital-Skill complementarity? Evidence from a Panel of Countries," Departmental Working Papers 2003-012, Department of Economics, Louisiana State University.
  6. Bergstrom, Villy & Panas, Epaminondas E, 1992. "How Robust Is the Capital-Skill Complementarity Hypothesis?," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 540-46, August.
  7. repec:fth:oxesaf:97-11 is not listed on IDEAS
  8. repec:fth:oxesaf:97-10 is not listed on IDEAS
  9. H. Zhou, 2001. "The Demand For Labour In Zimbabwe'S Engineering Industry: 1995-1997," South African Journal of Economics, Economic Society of South Africa, vol. 69(4), pages 734-751, December.
  10. Yasar, Mahmut & Morrison Paul, Catherine J., 2008. "Capital-skill complementarity, productivity and wages: Evidence from plant-level data for a developing country," Labour Economics, Elsevier, vol. 15(1), pages 1-17, February.
  11. Berndt, Ernst R. & Christensen, Laurits R., 1973. "The translog function and the substitution of equipment, structures, and labor in U.S. manufacturing 1929-68," Journal of Econometrics, Elsevier, vol. 1(1), pages 81-113, March.
  12. Berndt, Ernst R. & Morrisson, Catherine J., 1979. "Income redistribution and employment effects of rising energy prices," Resources and Energy, Elsevier, vol. 2(2-3), pages 131-150.
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