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Determinants of labor employment in the manufacturing sector of Malaysia

Yusoff, Mohammed and Syed Salleh, Sharifah Nabila (2015) Determinants of labor employment in the manufacturing sector of Malaysia. In: Global Conference on Economics and Management Science 2015 (GEMS 2015), 12th-13th Oct. 2015, Bayview Beach Resort Penang Hotel, Penang.

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Abstract

The manufacturing sector has been contributing significantly to the Malaysia’s economy in terms of its contribution to GDP, employment, and exports. This paper examines the determinants of employment of labor in the Malaysian manufacturing sector. We estimate the model using the instrumental variable technique and the results suggest that the real wage rate, output represented by the value added, and capital represented by the value of fixed assets are all important determinants of labor employment in manufacturing sector in Malaysia. This implies that implementing policies to encourage capital accumulation and overall economic growth are indeed helpful to boost employment in the manufacturing sector. The elasticity of labor employment with respect to wage rate is 1.86 suggesting that labor employment is responsive to the changes in wage rate; a 1% decrease in wage rate increases employment by 1.86% which will then spur the manufacturing output which are mostly exported to foreign countries. This suggests that employment in the manufacturing sector could be created through wage reduction, increase in capital and output level.

Item Type: Conference or Workshop Item (Plenary Papers)
Additional Information: 4178/45138 (e-ISBN: 978-967-0792-05-7)
Uncontrolled Keywords: labor employment, wage
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD4801 Labor. Work. Working class
Kulliyyahs/Centres/Divisions/Institutes: Kulliyyah of Economics and Management Sciences > Department of Economics
Depositing User: Professor Mohammed Yusoff
Date Deposited: 15 Dec 2015 09:56
Last Modified: 24 May 2016 11:29
URI: http://irep.iium.edu.my/id/eprint/45138

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