Cambodia Production Function Elasticity Across Industries and the degree of intensive

The degree of intensive is calculated as ratio of Capital to Labor. Using data complie from CDC, the project based data(Approved project),  I try to find out the comparison across industry. The result shown that the garment,textile and footwear is quite labor intensive compare to other industry. Foreign Capitl tend to be more intensive than domestic capital. The following table show the ratio. Note that the industry classification in 13 manufacturing industry I made a combination of some industry by trying to make consistent of data availabe between gross value added data from NIS and the project data of CDC. In a correction the real disbursement capital and labor of project should be used because some project migt be unfinised or delayed. however due to the lack of data in Cambodia. The comparison is at least show some meaning.  Labor and Capital are accumulated at each period. 

Year		Industry	K/L	Kd/L	Kf/L
2003	1	Mining	22,834.65	1,172.31	11,645.73
	2	Food	12,322.44	3,378.12	8,449.46
	3	Tobacco	32,786.38	7,429.01	11,093.15
	4	Textiles	2,618.69	224.93	997.17
	5	Wearing Apparel	1,092.87	466.93	2,284.80
	6	Footwear	1,714.98	429.03	1,695.48
	7	Wood Product Manufacturing	14,888.39	1,474.64	3,433.94
	8	Paper and Publishing	7,433.36	3,189.72	9,148.75
	9	Rubber Manufacturing	7,394.27	5,008.53	14,273.11
	10	Non-Metalic Manufacturing	63,475.09	2,377.60	1,505.66
	11	Basic Mental and Metal Product	3,881.09	7,482.28	3,911.21
	12	Other Manufacturing	5,803.28	2,496.12	5,020.51
	13	Electricity, Gas and Watr	140,117.51	13,272.15	41,344.69

 

 

 

 

 

 

 

 

 Source: Calucated from CDC data
To trace how the degree of intensity change across over time, the same calucation is repeated across time preiod from 2003 t0 2005. The result show little change in degree of intensity.

A glacce to look at the production and elasticity across industry. The production function can be rewritted using Cobb_Dogulas production function.

Y=F(L,K_d,K_f )=AK_d^α K_f^β L^γε (1)

where

α: prouction elsasticity of domestic capita,

β:production elasticity of foreign capital

γ:prouction elasticity of labor

ε:Represent externality or error term for regression

A: Technology parameter 

   

K_d: domestic capital and 

 

K_f: foreign capital which define FDI in narrow sense.

By using logarithm for both sides the equation (1) became

 LnY=LnA+ αLnK_d+ βLnK_f + γLnL+ ϵ (2)

 I try to run regression to find the production elasticity of each periods to see if the production function in Cambodia across industry follows Homogenous degree one (Constant return to scale when sum of elasticity equal 1) or not?

Year	Capital		Labor		Sum of Elasticity	R-square	Std
2003	0.16	(0.23)	0.43*	(0.17)	0.59	0.58	0.83
2004	0.10	(0.23)	0.50*	(0.17)	0.61	0.63	0.80
2005	0.11	(0.21)	0.56*	(0.17)	0.67	0.68	0.75

*significant at p=5% and the standard error in the bracket.

The sum of elasticity of Capital dose not equal 1 but it shows the tendency of increasing from 2003 to 2004.

The following table let us see the change in elasticity across time 

Year	Cambodia		Foreign		Labor		Sum of Elasticity	R-square	Std
2,003	0.005	[0.318]	0.426	[0.343]	0.240	[0.218]	0.671	0.656	0.791
2,004	-0.030	[0.318]	0.401	[0.364]	0.313	[0.224]	0.684	0.688	0.775
2,005	0.286	[0.393]	0.040	]0.401]	0.465	[0.233]	0.792	0.712	0.749

 

Foreign elasticity is larger than the domestic elasticity of capital. This might be true due to the specific asset or production technology of foreign compare to domestic.

*The above calculation is subject to revised. It is my own calculation and error might be encountered. Comments are welcomed.