A Test for the Cobb Douglas Production Function in Manufacturing Sector: The Case of Bangladesh
International Journal of Business and Economics Research
Volume 5, Issue 5, October 2016, Pages: 149-154
Received: Aug. 16, 2016; Accepted: Sep. 1, 2016; Published: Sep. 21, 2016
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Shaiara Husain, Department of Economics, Southeast University, Dhaka, Bangladesh
Md. Shahidul Islam, Department of Economics, Southeast University, Dhaka, Bangladesh
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The manufacturing sector has been a major driver of GDP growth in Bangladesh. The sector recorded an impressive average annual growth during last a couple of decades. This study is an attempt to test empirically the Cobb-Douglas production function for manufacturing sector of Bangladesh. Data of total value of output, total asset, total liabilities, number of permanent workers etc. of about six major types of industries including Garments, Textiles, Food & Food Processing, Leather & Leather Products, Electronics and Chemicals& Pharmaceuticals have been used. Researchers use total value of output as Y, total liabilities as K, and number of permanent workers (including officials managers, personal) as L. Study finds that coefficient for K and L are 0.49 and 0.51 respectively for entire manufacturing sector. In case of Garments, coefficient for K is 0.30 and L is 0.61 implying that labor is more productive than capital. The statement is also true for Textile sector and Leather & leather products. Capital is, on other hand, more productive than labor in Food & food processing industries, Electronics, Chemicals & Pharmaceuticals sectors. The coefficients are significant and do not suffer from MC and also not from Autocorrelation. To correct heteroscedasticity, WLS method (weighted Least Square) has been adopted. Findings reveal that Cobb-Douglas production function is applicable and exhibits increasing returns to scale in the context of manufacturing sector of Bangladesh.
Manufacturing Sector, Cobb-Douglas Production Function, Productivity, Labor, Capital
To cite this article
Shaiara Husain, Md. Shahidul Islam, A Test for the Cobb Douglas Production Function in Manufacturing Sector: The Case of Bangladesh, International Journal of Business and Economics Research. Vol. 5, No. 5, 2016, pp. 149-154. doi: 10.11648/j.ijber.20160505.13
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