The elasticity of capital-labour substitution in Singapore construction

Abstract

A central issue in improving construction productivity is the flexibility in which capital and labour may be substituted. Empirical estimation using Singapore data suggests that the hypothesis of a unitary elasticity of substitution cannot be rejected:, thereby providing justification for policy measures to alter the relative prices of factor inputs to encourage mechanisation in construction. The finding is consistent with an earlier study on the American construction industry as well as numerous production function studies conducted for other industries.