Labor-use efficiency and employment elasticity in Chinese manufacturing

The paper analyzes labor-use efficiency and employment elasticity in China’s manufacturing sector by applying a stochastic input distance function to the panel data of twenty-eight Chinese manufacturing industries relative to 1999-2008. The outcome is a labor-use efficiency rate ranging from 32.9% to 100% with a mean value of 85.5%, in addition to efficiency gains over time. Employment elasticity was found to vary extensively across industries. Breaking down the employment rate of change into various components, such as technical change, technical efficiency change, and rate of change in inputs, etc., shows that the Chinese manufacturing industries experienced no "jobless growth" during the review period. Keywords: labor requirement function, technical inefficiency, stochastic frontier model