An Econometric Analysis of Production Function: The Case Study of Palestinian Industry

An Econometric Analysis of Production Function: The Case Study of Palestinian Industry PDF

Nasr Abdallah Qasim Abd- Alhkaleq

Supervisor(s)

Dr. Basim Makhool -

Discussion Commity

صفحة

Abstract :

An Econometric Analysis of Production Function: The Case Study of Palestinian Industry By Nasr Abdallah Qasim Abd- Alhkaleq Advisor Dr. Basim Makhool Abstract The main objective of this study was to estimate the production function of the Palestinian industry. The empirical results have been utilized to estimate production elastic ties, and elasticity of substitution. In addition, the study sought to calculate marginal productivity and the production technology and find out, whether the Palestinian industry was labor intensive or capital intensive. To these ends, the research used two methods for data analysis: descriptive and qualitative. The descriptive analysis was based on calculation of economic indicators United Nations Industrial Development Organization in 2000. The qualitative analysis estimated production function by using the analysis of regression cross- suction data, collected published by Palestinian Central Bureau of Statistics (PCBS) have been collected. The empirical results showed that the technology applied by Palestinian industry was labor intensive. The share of labor cost of total production accounted for 72%, while the cost of capital amounts to 28% of total output. Furthermore, production elasticity, with the respect to labor, was found to be highly greater than production elasticity with respect to capital. However, the marginal productivity of labor and capital was found to be 7.2 and 0.4 respectively. This implies that employing additional labor (head) will increase output by $7,200. On the other hand, output will increase only by $400 if capital increases by $1,000. This result suggests that cost of capital in Palestinian industry was very high. The performance of large firms was found to be similar to the total firms. The marginal productivity, with respect to labor for large and total firms, was about $7,290 and $7,200 respectively. Also, marginal productivity of capital, for large and total firms was $500 and $400 respectively. The marginal substitution average in the Palestinian industry was about 1

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