Transport Equipment Industry of India in the Era of Globalization

This paper concentrates on testing returns to scale, elasticity of substitution and efficiency wage hypothesis (according to which the co-efficient of wage rate is more than of capital intensity) in transport equipment industry. Augmented Dickey Fuller Test, Cobb-Douglas Production Function, Constant Elasticity of Substitution (CES) and Variable Elasticity of Substitution (VES) were applied for the period 1991/92-2008/09. The increasing returns to scale of the industry was proved with the significant co-efficient of labor input. There was neutral technical progress. Co-efficient of wage rate was statistically significant. Its numerical value was close to unity indicating unitary elasticity of substitution. The results of VES production function supported the hypothesis of efficiency-wage.