| dc.description.abstract | In the recent past, the mode of job creation in
Kenya has been very capital expensive--capital labour ratio
being several times larger than capital per head of population.
The result is that the rate of growth in employment
has been very disappointing in spite of very impressive
rates of growth of output and capital stock .. This study
is primarily concerned with the issue of employment from
the point of view of factor combination or choice of tech••
niques. Factor substitution and factor intensity receive
searching inquiry. Data are considered for a) the whole
economy and b) the manufacturing sector. The latter's
data are analysed both aggregatively and disaggregated by
firm size.
We utilize a CES production function as developed
by Phoebus J. Dhrymes to estimate both the elasticities of
substitution between capital and labour and the homogeneity
parameters. For an index of skill intensity (human capital) t
we use labour value added per person engaged. Various
indices of (physical) capital intensity are used: nonlabour
value added per person employed, fuels and depreciation
per person. Direct capital labour ratios are also
made use of, whenever available. We also develop a model
to discern what consequences befall when a firm maximizes
profit subject to a given production technique.
The conclusions arrived at are: that technological
progress in Kenya has been labour-saving; that the elasticity
of substitution between capital and labour, while roughly
the same across firm sizes, is uniformly greater than zero,
so that factor proportions can be altered by realigning
_ factor prices; that investment allowances and accelerated
depreciation are tantamount to a capital subsidy whose
abolition would result in adoption of more labour intensive
production methods than are new prevalent; that small scale
firms are less skill intensive and less capital intensive
than their larger counterparts, so "that promotion of the
former would save on scarce factors of production; that
factor prices confronting small firms are closer to accounting
or shadow prices,so that small firms are more statically
efficient than large firms; that the homogeneity parameters
are roughly the same (less than unity) across firm sizes
at the individual firm level, but at the aggregate level
small firms display increasing returns and large firms
diminishing returns suggesting that, while firm sizes
should be frozen, expansion should accent on multiplication
of small size enterprises; that many Kenya firms do not
choose from all the universally available production techniques,
and, by restriction to the capital intensive range,
the results are diminished labour intensity and above minimum
cost. One major recommendation is that institutional
and educational measures should be undertaken to hasten the
evolution and adoption of efficient labour intensive
technologies. | |
