Technical progress and labour productivity in small and medium scale industry in Malaysia

Idris Jajri, Rahmah Ismail

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

The role of Small and Medium Scale Industries (SMIs) is increasingly important for Malaysian industrial development. Being operating at moderate level of technology with low financial requirement, SMIs is always taken as a platform for young entrepreneurs to start their businesses. However, one of the problems facing SMIs is low productivity of labour which subsequently lower their contribution to output or value added. Therefore, even though with large number of establishments, SMIs' contribution to output, value added and fixed asset is far below of that by the large scale industries. Nevertheless, technology has been gradually upgraded in this sector especially in the medium size firms. Technical progress has an effect on the demand for labour. It is commonly observed that technical progress will be a complement with more skilled labour but a substitute with less skilled labour. This phenomenon presumably will give an adverse affect on labour productivity. This paper aims to investigate this effect using Industrial Manufacturing Survey data of 1985-2005 collected by the Department of Statistics Malaysia. The analysis will involve two stages, firstly, measuring technical progress using Data Envelopment Analysis framework developed by Coelli (1985). Secondly, to examine effect of technical progress on labour productivity using a regression model approach. We stipulate that technical progress will have a positive effect on labour productivity due to its complementarity with skilled labour and a positive relationship between skills and productivity.

Original languageEnglish
Pages (from-to)199-208
Number of pages10
JournalEuropean Journal of Economics, Finance and Administrative Sciences
Issue number15
Publication statusPublished - Jan 2009

Fingerprint

Technical progress
Malaysia
Labour productivity
Industry
Skilled labor
Value added
Productivity
Entrepreneurs
Fixed assets
Complementarity
Demand for labor
Substitute
Survey data
Statistics
Data envelopment analysis
Manufacturing
Labor
Regression model
Industrial development
Firm size

Keywords

  • Data envelopment analysis
  • Labour productivity
  • Small and medium scale industries (SMIs)
  • Technical progress

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics, Econometrics and Finance(all)

Cite this

Technical progress and labour productivity in small and medium scale industry in Malaysia. / Jajri, Idris; Ismail, Rahmah.

In: European Journal of Economics, Finance and Administrative Sciences, No. 15, 01.2009, p. 199-208.

Research output: Contribution to journalArticle

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