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Volume :15 Issue : 2 2008
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Factor Substitution in Manufacturing Industries in Kuwait
Auther : Nadeem A. Burney
The production structure of manufacturing industries in Kuwait has been examined, with specific focus on factor substitution. This has been done by estimating trans-logarithmic cost functions using annual time-series data. The results indicate that the implied production structure is non-homothetic, and the pattern of scale effect is labor and capital saving but material using. The evidence also supports the presence of induced exogenous technical change, which is non-neutral (labor and capital saving). For the majority of the industries, the elasticity of substitution between capital and labor is positive, implying that the two inputs are substitutes.