The Performance of the Palestinian Industry: An Econometric Analysis of Industrial Production function 1994-2000

The Performance of the Palestinian Industry: An Econometric Analysis of Industrial Production function 1994-2000

Gaber Abu-Gamea

j.abujamea@up.edu.ps

Received : 09-12-2007 , Accepted : 17-11-2008

Language: Arabic

Abstract

This study evaluates the performance of the Palestinian industrial sector for the period 1994-2000. It sets an industrial Cobb-Douglas production connecting production to fixed capital investment and labor. The study uses panel analysis methodology throughout fixed-random effects procedures. Mainly, empirical results of fixed effects indicate the existence of heterogeneity among industries. Evidence on this heterogeneity is given by introducing dummy variables in production equation. Distinctively, random-effects result shows that the Palestinian industry slightly surpassed constant returns to scale, a situation reflecting a limited improvement for industry within this period. Generally, empirical results show a relatively marginal impact of capital on industrial production compared with a significant influential one for labor force, a situation reflecting the dependence of industrial production on labor and weakness of industry capital capabilities. Overall, these results reveal a potential ability of the Palestinian industry for a better performance with an expected favorable industrial environment in future.

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