An analysis of technological change, factor substitution and economies of scale in manufacturing industries in India

Abstract

The biases of technological change, factor substitution and economies of scale in four major manufacturing industries (viz. Cement, electricity and gas, cotton textiles and iron and steel) in India are examined. The translog cost functions are estimated using annual time series data covering the period 1960-61 to 1982-83. The study reveals that technical change has been biased towards the use of labour and materials and against the use of capital and energy in electricity and gas industries. In cotton textiles, the technological change has shown the opposity biases. Significant economies of sclae exist in the production of electricity and gas. Enough evidence of substitution possibilities among factors of production in all the four industries was also found.