A Decomposition Analysis for Labour Demand: Evidence from Malaysian Manufacturing Sector

Malaysia experienced four major phases of industrialization, with import substitution or export orientation dominating each phases alternatively. Manufacturing sector is important in Malaysia’s industrial development, inducing rapid growth, technology expansion and upgrading labor skill. High growth rates and high technology expansion in these sector resulted in a substantial increase in demand for labor. Indeed, currently the economy is continuously experiencing further structural adjustments in output and employment as the degree of integration with world markets increases and changes in technology deepen. By using three Malaysian input-output tables; 1978, 1991 and 2000 input-output tables the present study employs the popular model namely the Structural Decomposition Analysis (SDA). The result also shows that changes in the final demand structure were the major source of labor growth, dominating by domestic demand during 1978-1991 and by export demand during 19912000. Key-Words: manufacturing, decomposition, labor, input-output, growth and Malaysia