Determinants of Factor Proportions in Manufacturing in a Developing Country

Employment generation is a main objective of a developing country's industrialisation policy. The realisation of this objective depends largely on the nature of factor intensity in its manufacturing industry. This has generated a considerable amount of academic discussion on the determinants of factor intensity. However, most of these studies have arrived at differing conclusions, creating a necessity for more extensive empirical investigation into a wider range of developing country situations. This paper presents results from an analysis of factor intensity in the Sri Lankan manufacturing industry. The results indicate that large firms tend to be more capital intensive than small firms. There is also evidence that locally owned firms are more labour intensive than foreign owned firms, Further, high-wage firms seem to use relatively more capital intensive production techniques than low-wage firms,