Short-Run Employment Functions in Manufacturing Industries

Abstract

Problem statement: Increasing growth of population and shortage of producing capacity in Bangladesh have caused serious unemployment crisis and has forced the authorities to look for ways to reduce unemployment rate. Due to difference of structure and technology used in economic sectors and activities, the effects of factors on employment are different. So, for the purpose of findings alternatives to reduce unemployment rate in Bangladesh, it is necessary to estimate employment functions in all sectors and activities, analyze the most important factors and variables on these functions. Approach: In this study an attempt had been made to estimate short-run employment functions in manufacturing industries of Bangladesh, which are one of the most important sectors that has formed meaningful percent of country employment and gross national production. Adjustment of employment to its desired level and short run returns to employment had been explored in this study. Results: The model type I in comparison to the model type II of the relationship between value added and employment, which had been found to fit quiet well in Bangladesh manufacturing industries. The results showed that 1% increase in gross value added leads to 0.379% increase in employment. The coefficient of lagged employment is positive, indicated that the level of previous years employment increases the present year employment. Conclusion: The result also showed that the employment is negatively related to the real wage rate and the elasticity of employment with respect to real wage is about -0.251. The growth rate of value added exceeded the growth rate of employment in manufacturing industries in Bangladesh.