A Measure of the Elasticity of Substitution in the Manufacturing Sector of Pakistan

Abstract

From a technological perspective, the paper is mainly concerned with finding the employment potential in different groups of industries of Pakistan. The role of factor prices in determining techniques of production in the industrial sector through elasticity of substitution has been analysed. Besides taking the large-scale manufacturing sector as a whole, three broad categories of industries viz., consumer goods, intermediate goods and capital goods industries has been selected in particular for the empirical analysis. By utilising the OLS technique, the cross-section analysis for the year 1995-96 has been made. Our results indicate the there is great potential for employment in the intermediate and capital goods industries provided there are no factor price distortions in the economy.