Regional Patterns of Employment Growth - An Lnter-State Analysis of Indian Manufacturing Sector

Abstract

Increasing the demand for labour or generation of employment opportunities is directlylinked with the process of-economic growth. The elasticity of employment indicates thepercentage growth in Fr.ital empkyment (or sectoral employment) to be expected from a oneper cent growth in GDP (or GDP in individual sectors). Since labour is an input in thevalue addition process, an increase in output is normally associated with an increase inlabour use or employment. This implies that the elasticity ofemployment is generally expectedto be positive. However, employment elasticities are typically expected to be less than unitybecause productivity per person employed is expected to increase over time. This implies thatemployment increases less than proportionately to output growth. An attempt in the presentpaper is made to examine the regional patterns ofempkyment growth and analyse the short-runand long-run employment elasticities in regard to both real wages and output for themanufacturing sector in 16 states of India for the period 1991-92 to 2008-09. From theestimates ofthe fit labour demand fonctions we couU conclude, that the emp/,oyment growthin the Indian Manufacturing Sector has been quite sensitive to changes in the real wagesboth in the short-run as well as in the /,ong-run.