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For application to data at discrete points of time, an approximation to the continuous Divisia index, known as translog index, may be used. This assumes that translog function describes the relationships between Y, K, L and T and also the relationships between the aggregates and components. Losses over time and as a process became sick and finally had to close down the unit.

In contrary, TI is superior to both KI and SI because TI numbers are symmetric in data of different time periods and also satisfy the factor reversal test approximately4 . It is based on Translog Production Function characterised by constant returns to scale. It allows for variable elasticity of substitution and does not require the assumption of Hicks-neutrality. Capital intensive is a business process or an industry that requires large amounts of money and other financial resources to produce a good or service. A business is considered capital intensive based on the ratio of the capital required to the amount of labor that is required. Here OK amount of capital and OL amount of labour produces the output level denoted by isoquant IQ.

The study tries to examine the factor productivity growth, especially of capital and labour across industry groups in West Bengal. The most important aspect of the paper will be estimates of total factor productivity growth for West Bengal, supposed to be the first comprehensive attempt in this area. Cent in 1999 from 16.2 per cent in 1960 while that of chemical products went down to merely 0.7 per cent from 16.4 per cent over the same period of time .

Distinguish between labour-intensive and capital-intensive technology of production.

The study shows that West Bengal has gradually lost its stronghold position once enjoyed during the early 1960s. The State’s shares in net value added, employment and number of factories have gone down drastically over the years. So far as employment is concerned, majority of the industry groups has witnessed negative growth rate. It is interesting to note that only 5 industry groups, which are highly capital intensive, contributed over 85 per cent of total profit in the manufacturing sector. It has also been found that growth of labour productivity in the manufacturing sector as a whole increased from 1.6 per cent in 1970s to 2.6 per cent in the 1980s and further to 5.7 per cent in 1990s.

The equation is based on the general neo-classical production function for which the elasticity of substitution need not be infinite, equal to unity or even constant. The above equation actually measures the difference between the rate of growth of real value added and the rate https://1investing.in/ of growth of factor inputs. There are basically two methods of production namely labour intensive and capital intensive. Methods of production in which more work is carried on by technological machines rather than labours, then it is known as capital intensive technique.

The share of net value added of six important industry groups in West Bengal to all India NVA has declined over the past 30 years. Because of deceleration in growth rate of these industries, the overall industrial scenario of the State was adversely affected. Moreover, the total factor productivity of the manufacturing sector of the State declined during the period, whereas it has gone up at the all-India level. The TFP growth contribution to output is found to be negative for two out of the six industry groups.

Why is the slope of a production posibility curve concave to the origi…

The properties of the Divisia index, which make its application highly desirable, have been discussed in the seminal paper of Christensen and Jorgenson . It has been pointed out that the rates of growth of the Divisia indexes of prices and quantities add up to the rate of growth of the value and that such indexes are symmetric in different directions of time . The translog index is a discrete version of the continuous Divisia index. Translog index numbers are symmetric in data of different time periods and also satisfy the factor reversal test approximately. The translog index of technological change is based on a translog production function, characterised by constant returns to scale.

However, as a whole, the industrial sector does not seem to have come out from decelerating condition. Technological obsolescence of these six important industry groups may be one of the major reasons of industrial deceleration in the State. Furthermore, although some industries have lost their base, no new industry has come up to take over that position. In contrast, as the analysis in this paper suggests, the situation is entirely different in the arena of industrial development of the State.

• I is the gross capital formation/investment, B is the book value of fixed capital, D is depreciation, K is the stock of capital at current prices.
• It is interesting to note that only 5 industry groups, which are highly capital intensive, contributed over 85 per cent of total profit in the manufacturing sector.
• The study tries to examine the factor productivity growth, especially of capital and labour across industry groups in West Bengal.
• Financial planning is the process of preparation of a financial blueprint of an organisation’s future operations.
• The higher the isoquant IQ1 shows larger output which produced by using OK1 amount of capital and OL amount of labour.

Financial planning is the process of preparation of a financial blueprint of an organisation’s future operations. The objective of financial planning is to ensure that enough funds are available at right time. A market economy is an economic system in which economic decisions and the pricing of goods and services are guided by the interactions of a country’s individual citizens and businesses. Distinguish between labour-intensive and capital-intensive technology of production. The higher the isoquant IQ1 shows larger output which produced by using OK1 amount of capital and OL amount of labour.

Mention two reasons that give rise economic problems

Section II discusses the structure, composition and growth of industrial sector in West Bengal. Section III deals with capital intensity, and capital and labour productivity. TFP is discussed in Section IV. Concluding observations are presented in the final Section. Labour productivity is considered to be one of the oldest and widely used measures of productivity (Trivedi, et al. 2000).

Factor intensity can be discussed with the help of fixed capital per employee and value added per employee. However, there is no unique measurement of capital intensity or labour intensity. Industries can be grouped into labour-intensive or capital-intensive on the basis of average capital-labour ratio (K/L). If the capital-labour ratio of a particular industry is above the average then the industry may be considered as a capital-intensive one. However, this methodology is admittedly arbitrary in nature since there is no specific capital-labour ratio for the industries. The key feature of the GAA is separation of change in production on account of changes in the quantities of factors of production from residual influences, which include technological progress, learning by doing, etc.

Subsequently Christensen and Jorgenson , Jorgenson and Griliches 1972), Gallop and Jorgenson have used approximations to the Divisia index known as translog index in their studies. Although technological progress did not get importance capital intensive technique refers to in the work of classical economists like Malthus, Ricardo and Mills, it is considered to be a major determinant of economic growth today. Subsequently, in the works of Marx and Scumpeter it got some importance with varied degrees.

Which of the following is not an economic goal of the firm

On the other hand capital-intensive technology uses more capital per unit of output. Without proper skill and basic facilities a country can not apply capital intensive technology. A similar picture emerges from an analysis of the trends in the IIP of the State . I is the gross capital formation/investment, B is the book value of fixed capital, D is depreciation, K is the stock of capital at current prices. Where, V is real value added, w denotes the share of labour in nominal value added, L and K indicate labour and capital, respectively.

Explain any four points that highlight the importance of financial planning.

Demerits of Capital intensive technique

Hence the obvious economic consequence has been exit of all inefficient industrial units. Since the exit process occurred in a phased manner it perhaps led to a gradual and systematic decline of aggregate industrial output and employment – a process termed de-industrialisation. Labour intensive technology of production refers to the technique in which more labour per unit of output is used.