Analysis Of Growth and Factor Allocation In Small-Scale Industries In Uganda Kampala-Case Study, (1981-1995)
WASSWA, LULE MOSES (Adv.: Drs. A. Budi Purnomo, MA), Drs. A. Budi Purnomo, MA
The industrialisation process constitutes an intrinsic aspect in improving the labour quality and the ability to lead to economic growth. This research on small-scale industries in Kampala (Uganda; an African country) is based on the purpose to investigate the level of productivity, level of technical efficiency, returns to scale and elasticity of substitution between factors in the various subsectors of small-scale industries. Considered in this research are the five popular sub-sectors of small-scale industries in Uganda as defined by the ministry of industry and technology (MOLT), that is, grain milling, wearing apparel, furniture and woodworking, engineering and steel fabrication, and lastly tiles and bricks. Small-scale industries are establishments with a capital investment on plant and machinery not exceeding US $ 300,000. Several variables are considered in this research which include quantity of output in each year for each of the sub-sectors, expenditure on labour, expenditure on capital in each year for the various sub-sectors. The choice of the variables is based on their ability to give the highest R2. The backbone of the research is time-series secondary data from 1981 up to 1995 where 1981 is the base year (1981 = 100). The research employs the constant elasticity of substitution (CES) production function to be estimated with ordinary least squares (OLS). The CES production function model shows that elasticity of substitution is always constant but not necessarily unity. In other words, the value of elasticity of substitution (a) does not change with changes in the relative prices of the factors of production (inputs) whose change is determined by the technological situation (Wallis, 1979: 67). The first version of CES (Kmenta version) has been used in all its three sub-versions taking one that gives the most significant estimates. The choice of the model is based on the fact that all the important issues of this research ( technical efficiency, returns to scale, elasticity of substitution) are represented in it. The research is based on the theory of production where the concept of the production function summarises the technical conditions facing the firm. It shows the functional relationship given by technology between a firms physical rates of input and its physical rates of output per unit of time which is, for economic purposes, defined only for non-negative values of the factors and output level. As far as the results of this research are concerned, the descriptive results of estimation of productivity show that, total productivity is higher in sub-sector 1 (grain milling, bakery/jaggery), and it is fast increasing and indeed this subsector has attracted several new investors. It is followed by 2 (wearing apparel, shoes, leather), 5 (tiles bricks and others), 3 (furniture and woodworking), and lastly 4 (engineering and steel fabrication) and their estimates are, 2.13, 2.00, 1.56, 0.69, 0.67. respectively. It can therefore be accepted that small-scale industries in Kampala have varying productivity levels (both total and labour). When it comes to labour productivity, estimates show that sub-sector 1 is still on the top followed by 2, 3, 4, and lastly 5. The labour productivity estimates (indices) are, 5.28, 3.82, 3.45, 3.30, and finally 3.08 respectively.
Kata Kunci : technical efficiency, returns to scale, elasticity of substitution, productivity levels, constant elasticity of substitution (CES), ordinary least squares (OLS), industrialisation process, ministry of industry and technology (MOLT).
