The Measurement of Input Elasticity: a Case Study at SAIPA Automobile Manufacturing

چکیده

The main objective of this survey is to examine the efficiency and productivity in SAIPA Automobile Manufacturing as the second the largest car producer in Iran. This company is one of most important company in Iran based on the share of GNP and high rate of employment on it. The research answers two specific questions: (i) what levels are the marginal productivity of labour and capital? (ii) How big are the output elasticity with respect to input? The cobb-Douglas production function was estimated for SAIPA Automobile Company to show the relationship between input and output applying the time series data from 1990 to 2019. The research found out the output elasticity with respect to labour and capital are 0.1 and 0.72, respectively. Consequently, the company has experienced the decreasing returns to scale (DRS) in the period of the study. Based on the amount of elasticity, output changes 0. 1 percent by one percent change in labour. Also, one percent changes in capital makes 0.72 percent change in output. The study states to get the input use efficiency the empirical policies are using modern technology and decreasing input use.