Labour-use efficiency in ASEAN countries / Le Bao Ngoc Nguyen, Poomthan Rangkakulnuwat and Ahmad Shabir Faizi

This paper investigates labour-use efficiency across the six largest Association of Southeast Asian Nations (ASEAN) economies—Singapore, Malaysia, Thailand, Vietnam, Indonesia and the Philippines—from 1990 to 2018. The study employs a flexible translog functional form to specify labour demand, defined as a function of output, average wage, capital stock, country-specific variables and time effects. We generalize the model by incorporating a variance function which accommodates marginal effects. The parameters of the demand and variance functions are estimated through a multi-step procedure using generalized least squares and a nonlinear method, respectively. The empirical results show that the average labour-use efficiency among ASEAN countries is about 96.2 per cent, implying that the six ASEAN countries are very efficient in labour use relative to the country with the best labour-use practice in our sample, Singapore. In comparison with Singapore (100 per cent efficient), the labour-use efficiency of Malaysia is 98.3, Vietnam is 96.6, the Philippines is 96.5, Thailand is 94.4, and Indonesia is 91.5 per cent. The two-sample t-test results show that the labour-use efficiency significantly differs between countries.