Labor-use Efficiency in Tunisian Manufacturing Industries

Abstract

This paper investigates the process of adjustment in employment. A dynamic model is applied to a panel of six Tunisian manufacturing industries observed over a period of 25 years, from 1971 to 1996. Industries are assumed to adjust their labor inputs toward a desired level. A labor requirement function is specified in terms of observable variables used to model the desired level of labor. The adjustment process is both industry-specific, as well as time-specific, and is expressed in terms of factors affecting the speed of adjustment. The empirical results show that, in the long run, employment demands respond greatest to output, followed by changes in capital stock, and least by wages. Over time, the speed of adjustment in employment and the degree of labor-use efficiency show large variations among the industries.