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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.

Suggested Citation

  • Akay, Gokhan H. & Yuksel, Mutlu, 2009. "Capital-Skill Complementarity: Evidence from Manufacturing Industries in Ghana," IZA Discussion Papers 4674, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4674

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    2. John Duffy & Chris Papageorgiou & Fidel Perez-Sebastian, 2004. "Capital-Skill Complementarity? Evidence from a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 327-344, February.
    3. 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.
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    5. 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.
    6. 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.
    7. Teal, Francis, 2000. "Real wages and the demand for skilled and unskilled male labour in Ghana's manufacturing sector: 1991-1995," Journal of Development Economics, Elsevier, vol. 61(2), pages 447-461, April.
    8. 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 540-546, August.
    9. 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.
    10. Bigsten, Arne, et al, 1999. " Investment in Africa's Manufacturing Sector: A Four Country Panel Data Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 489-512, November.
    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. 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.
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    Cited by:

    1. Correa, Juan & Lorca, Miguel & Parro, Francisco, 2014. "Capital-Skill Complementarity: Does capital disaggregation matter?," MPRA Paper 61285, University Library of Munich, Germany.
    2. repec:bla:worlde:v:40:y:2017:i:2:p:369-392 is not listed on IDEAS
    3. Luke Emeka Okafor & Mita Bhattacharya & Harry Bloch, 2017. "Imported Intermediates, Absorptive Capacity and Productivity: Evidence from Ghanaian Manufacturing Firms," The World Economy, Wiley Blackwell, vol. 40(2), pages 369-392, February.

    More about this item


    elasticity of substitution; capital-skill complementarity; translog cost function;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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