Abstract
The employment share of the industry has been decelerating in many developing countries. Even when industrialization in terms of value added has occurred in some of the countries, the share of industry in total workforce still dwindles at a low level. All this has raised concern as the twin objectives of growth and poverty reduction through productive employment generation in the industrial sector do not seem to have come through. This paper based on panel data from developing countries tries to verify if import of technology reduces the labour-absorbing capacity of the manufacturing sector. The overall results based on countries across South and East Asia, Africa and Latin America are indicative of such a tendency. After controlling for real wage rate and real GDP per capita, this chapter notes a negative effect of manufactures imports (as a percentage of total merchandise imports) on employment to value-added ratio. Besides, the technical efficiency index derived by employing a statistical stochastic frontier function framework also tends to vary inversely with technology import from abroad. This implies possible mismatches between the available technology and the skill base of the workforce to operate the technology. In fact, evidence is also indicative of an inverse relationship between inadequacy of skill and employment growth in the industrial sector. In particular, it examines if skill scarcity in the domestic economy reduces the optimum use of the technology imported from abroad.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
The terms manufacturing and industrial sector are used synonymously.
- 2.
Globalization raises capital flows from developed to developing countries which means that, even without technology imports, capital output ratios in developing countries would rise and, given the complementary relationship between capital and skills, this would raise the relative demand for skilled labour (Mayer 2000). Johanson (2004) argues that it is not possible to disentangle the interlinked factors responsible for changes in skill demands, but at least three main forces are at work in increasing the demand for skills worldwide which are technological change, changes in work organization and trade openness.
- 3.
Thus, our analysis is only partial in this context.
- 4.
Japan being an East Asian country has been included in the analysis.
- 5.
Only Korea shows a wrong sign.
- 6.
Situation 1: value-added growth: 6%, employment growth, 5%, and labour productivity growth 1% and employment elasticity 0.83. Situation 2: value-added growth: 8.1%, employment growth, 7%, and labour productivity growth 1.1% and employment elasticity is 0.86.
- 7.
Situation 3: value-added growth: 10%, employment growth, 7%, and labour productivity growth 3% and employment elasticity 0.7.
- 8.
For some of the countries, information only on one or two variables and that too for a few years is available.
- 9.
Berg and Cazes (2007) however point out the serious conceptual and methodological problems associated with the World Bank’s Employing Workers Index of the Doing Business indicators and risks of formulating policies on the basis of these indicators.
References
Acemoglu, D., & Zilibotti, F. (2001). Productivity differences. Quarterly Journal of Economics, 116, 563–606.
Aigner, D. J., Lovell, C. A. K., & Schmidt, P. (1977). Formation and estimation of stochastic frontier production function models. Journal of Econometrics, 6, 21–37.
Azeez, A. E. (2006). Domestic capacity utilization and import of capital goods: Substitutes or complementary? Evidence from Indian capital goods sector. In S. D. Tendulkar et al. (Eds.), India: Industrialisation in a reforming economy (Essays for K.L.Krishna, pp. 141–156). New Delhi: Academic Foundation.
Battese, G. E. (1991). Frontier production functions, and technical efficiency: A survey of empirical applications in agricultural economies. Paper, Department of Econometrics, University of New England, Australia No. 50.
Bauer, P. W. (1990). Recent developments in the econometric estimation of frontiers. Journal of Econometrics, 46, 21–39.
Berg, J., & Cazes S. (2007). The doing business indicators: Measurement issues and political implications (Economic and Labour Market Papers 6). Geneva: Employment Analysis and Research Unit, Economic and Labour Market Analysis Department, International Labour Office.
Berman, E., & Machin, S. (2000). Skill-biased technology transfer: Evidence of factor biased technological change in developing countries, mimeo. Available at http://dss.ucsd.edu/∼elib/glob.pdf
Chakravarty, S. (1987). Development planning: The Indian experience. New Delhi: Oxford University Press.
Chandrasekhar, C. P. (1992). Investment behaviour, economies of scale and efficiency in an import substituting regime: A study of two industries. In A. Ghosh et al. (Eds.), Indian industrialisation, structure and policy issues. New Delhi: Oxford University Press.
Evenson, R., & Westphal, L. E. (1995). Technological change and technology strategy. In J. Behrman & T. N. Srinivasan (Eds.), Handbook of development economics (Vol. 3A, pp. 2209–2229). Amsterdam: North-Holland (Chapter 7).
Ghose, A. K. (2000). Trade liberalisation and manufacturing employment (Employment Paper 3). Geneva: Employment Strategy Department, Employment Sector, International Labour Office.
Hasan, R. (2002). The impact of imported and domestic technologies on the productivity of firms: Panel data evidence from Indian manufacturing firms. Journal of Development Economics, 69, 23–49.
Hasan, R., & Mitra, D. (Eds.). (2003). The impact of trade on labor: Issues, perspectives and experiences from developing Asia. Amsterdam: Elsevier Science B.V. North Holland.
Johanson, R. K. (2004). Implications of globalization and economic restructuring for skills development in Sub-Saharan Africa (Working Paper No. 29). Geneva: ILO.
Mayer, J. (2000). Globalization, technology transfer and skill accumulation in low-income countries (WIDER Project, No. 150). Geneva: UNCTAD. Available at http://www.unctad.org/en/docs//dp_150.en.pdf
Pack, H., & Todaro, M. (1969). Technological transfer, labour absorption, and economic development. Oxford Economic Papers, 21, 395–403.
Pandit, B. L., & Siddharthan, N. S. (2006). MNEs, product differentiation, skills and employment: Lessons from Indian experience. New Delhi: Institute of Economic Growth.
Robbins, D. (1996). HOS hits facts: Facts win; Evidence on trade and wages in the developing world (Development Discussion Paper Number 557). Cambridge: HIID, Harvard University.
Rodrik, D. (1997). Has globalization gone too far? Washington, DC: Institute for International Economics.
Srivastava, V. (2000). The impact of India’s economic reforms on industrial productivity, efficiency and competitiveness: A panel study of Indian companies 1980–1997. New Delhi: National Council of Applied Economic Research.
UNIDO. (2005). Productivity in developing countries: Trends and policies. Vienna: United Nations Industrial Development Organisation.
van Ginneken, W., & van der Hoeven, R. (1989). Industrialisation, employment and earnings (1950–87): An international survey. International Labour Review, 128(5), 571–596.
Wood, A. (1997). Openness and wage inequality in developing countries: The Latin American challenge to East Asian conventional wisdom. World Bank Economic Review, 33, 33–57.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2013 Springer India
About this chapter
Cite this chapter
Mitra, A. (2013). Technology Import and Industrial Employment: India and Other Developing Countries. In: Insights into Inclusive Growth, Employment and Wellbeing in India. Springer, India. https://doi.org/10.1007/978-81-322-0656-9_5
Download citation
DOI: https://doi.org/10.1007/978-81-322-0656-9_5
Published:
Publisher Name: Springer, India
Print ISBN: 978-81-322-0655-2
Online ISBN: 978-81-322-0656-9
eBook Packages: Business and EconomicsEconomics and Finance (R0)