ABSTRACT
This chapter empirically evaluates the role of factor endowments as the determinants of the industry structure. It also examines if their significance and quantitative impact vary across the labour-intensive and capital-intensive categories to highlight the need to differentiate policy interventions. A generalised method of moments estimation technique is used to estimate the parameters. A higher spontaneity of adjustment in the industry structure in organised manufacturing, though not as much for unorganised manufacturing, shows a relative stickiness to the output structure of the past for the latter segment. The stronger effect of capital endowments for the capital-intensive industries in the organised segment suggests greater capital use in the organised segment in the future, essentially pointing to the need to improve the demand–supply match in the labour skills underway in the increasingly capital-intensive production setup. Within the unorganised segment, the relatively lower impact of capital endowments on the structure of capital-intensive industries reinforces the unfavourable conditions of capital-intensive industries. However, the structure of labour-intensive industries is more responsive to higher endowments of capital. This calls for a need to bring in additional capital which will also have to be supplemented with a generally more adaptive labour therein, so as to avoid the adverse impact on specific worker categories.
