Lags in Employment Adjustment and Inter-Industry Differentials: an Analysis Using Dynamic Inter-Related Factor Demand Functions.

Based on an analysis of dynamic inter-related factor demand functions estimated for different industry groups over the period 1960-61 to 1993-94, the present study provides evidence of existence of significant adjustment lags in employment which can complement other documented factors in providing an explanation for the observed relative movement in output and employment groeth. In terms of the econometric approach, the present study attempts to fill some of the gaps in earlier empirical work by highlighting the importance of inter-relatedness in factor demand and the heterogeneity across labour types as well as across industries.