Econometric Analysis of Production Behavior in the Chemical Industry of Bangladesh: A Panel Data Framework

Abstract

In this study we have attempted to consider the relationship between the gross output and few explanatory variables in the form of Cobb-Douglas production function model of different firms of Chemical industry of Bangladesh using panel data framework. For analysis purpose we have used data for 4 sub-sectors of chemical industry namely, PVC pipe, Paper, Sanitary ware and Insulator for the period 1999 to 2009.However, for our study purpose we have considered only fixed effect model version of panel data. In this study we consider only four possible cases of fixed effect model which are (1) all coefficients constant across time and individuals, (2) slope coefficients constant over individuals and time but intercept varies across individuals, (3) slope coefficients constant over individuals and time but intercept varies over individuals and time, (4) all coefficients varies across individuals. To stay in the competitive market we have to invest as much possible. Total cost has positive effect on the production. We have considered economies of scale. Results indicate the necessity for appropriate policies at the national level for raising production to increase contribution of chemical industry to GDP.