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AN ECONOMIC ANALYSIS OF THE HIGH-TECHNOLOGY SECTOR IN THE PAKISTAN ECONOMY A TRANSLOG COST MODEL APPROACH

Aslam, Mohammad (2000) AN ECONOMIC ANALYSIS OF THE HIGH-TECHNOLOGY SECTOR IN THE PAKISTAN ECONOMY A TRANSLOG COST MODEL APPROACH. PhD thesis, Bahauddin Zakariya University, Multan.

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Abstract

The high-technology sector has become the most important and dynamic component of manufacturing in the economy of Pakistan, particularly in its remarkable performance in the generation of output and income. However, despite its importance as a source of employment, the rate of growth of high-tech employment during the last three decades has declined sharply. In addition a remarkable change in factor shares towards an increasing trend of capital share and a decreasing one in the income rewarded to labour has been observed. In spite of the crucial importance attributed to high-tech industries in Pakistan, no systematic study so far has been conducted on the structure of production of this sector. This study is therefore, the first attempt to fill this gap. The main objective of the study is to conduct an empirical analysis of the structure of production of the aggregate high-tech sector during the period 1975-76 to 1990-91, in terms of the extent of returns to scale, the rate and bias of technical change, and the degree of substitutability among factor inputs. A secondary objective is to examine the major implications of the estimated structure of production on the labour generation capacity of the high-tech sector, and the distribution of factor cost shares. The analysis is based on a translog specification of the cost of production that incorporates capital, labour and material inputs. Six models are estimated in order to test different hypothesis on the structure of production of the high-tech sector. Results of the study indicate that: a) production is characterized by positive economies of scale while technical change exibited a factor bias, being material saving and capital using, no discernible effect was noted with respect to labour; c) scale is labour and capital saving, and material using; d) the material-saving bias of technical change, and the unbiased scale effect contributed positively to the increase in the rate of cost diminution during the period analysed while the general bias and the capital-using bias of technical change contributed in the opposite direction; e) capital and labor, and capital and materials are strong substitutes; t) labour and material inputs were found to be complements during most of the period analysed, even though the estimated elasticity of substitution in this case was not statistically significant; g) the own-price elasticity coefficients for all three inputs were smaller than unity indicating a relatively inelastic demand; h) the demand for labour is more responsive to changes in the prices of the other two inputs than vice versa; i) capital and labour are not functionally separable from material inputs; and j) the results obtained on the structure of production of the high-tech sector are, in general, compatible with the trends observed in high-tech employment and factor cost shares. Finally, this study opened several areas of future inquiry. Among others, further research can be oriented to: a) extend, improve and disaggregate the data base used in the study; b) adjust the model to modify the technical change, long-run equilibrium (fixity of capital), and competitive markets assumptions; c) estimate the models for each industry included in the high-tech definition adopted; and d) perform additional tests related to the separability among factor inputs.

Item Type:Thesis (PhD)
Uncontrolled Keywords:Development Strategies, Manufacturing Structural Changes, Industrialization Strategies, Translog Framework, Tlog Cost, Homotheticity, Homogeneity
Subjects:Business Administration & Management (d)
ID Code:309
Deposited By:Mr Ghulam Murtaza
Deposited On:17 Jun 2006
Last Modified:04 Oct 2007 21:00

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