Translog cost function estimation for Philippine food and garment manufacturing

• Main Author: Onuh, Willington Okechukwu
• Format: text
• Language: English
• Published: Animo Repository 2004
• Subjects: Costs, Industrial; Food consumption > Philippines; Clothing trade > Philippines; Development Studies; Manufacturing
• Online Access: https://animorepository.dlsu.edu.ph/etd_doctoral/1231
• Institution: De La Salle University

This study has sought to empirically analyze the cost and production structures in the Food and Garment Manufacturing Industries. A translog variable cost function was estimated with four inputs using a cross-sectional sample of 81 Garment and 189 Food establishments in the Philippine Manufacturing Industry using 1997 Annual Survey Establishments data. The estimation was carried out by using the Iterated Seemingly Unrelated Regression (ITSUR). Economics of scale, Allen partial elasticity of substitution, own and price elasticities of demand for factor inputs used in the production process were calculated using parameter estimates from the ITSUR. The results show substitutability relationship between production workers and managers labor in both Garment Industry and Food Manufacturing Industry. The disaggregated Subsector substitution and price elasticities in the Food Manufacturing indicate low substitution possibilities in the highly protected subsectors. Though, evidence of economics of scale was found in both Garment Industry and Food Manufacturing Industry, Food Manufacturing showed more evidence of economics of scale. The study further reveals that in the Food Manufacturing Industry, 34 percent of variable costs on the average are costs of production workers, while this share is 69 percent in the Garment Industry. This implies that the Garment Industry is more production worker intensive.