Food Industry <br />Economics

Food Industry
Economics

ISSN Print: 2312-847X
ISSN Online:2411-4111
ISO: 26324:2012

OPTIMIZATION OF THE CAPITAL-LABOR RATIO IN THE FOOD INDUSTRY BASED ON PRODUCTION FUNCTIONS

Yankovyi V.;Melnik N.

Key words: optimization;capital-labor ratio;production function;rate of the substitution of the resources

Page: 34-39

Abstract

Production functions are an important element of construction and the use of modern econometric models at all levels of management in the food industry. This aspect of optimization seems highly relevant and topical in a highly competitive world in all sectors of the economy, worsening problem of increasing the competitiveness of domestic producers due to Ukraine\'s efforts to join the EU. The struggle for markets is impossible without increasing production of high quality food with minimal assets and workforce. The solution of this problem will allow improving the efficiency of Ukrainian food industry.
The possibility of optimization of the output within the Cobb-Douglas production function and the function with constant elasticity of the substitution of the resources is researched. The optimal capital-labor ratio providing maximization of the output is determined. It is shown that in this case the marginal rate of the substitution of the resources is equal to one. This means that each additional monetary unit (100, 1000, 10000 ...), aimed at production capital will ensure the reduction of labor costs for the exact same currency provided immutability issue of food. In case of failure this ratio can be seen as a signal of abuse optimal capi-tal-labor ratio, certain disproportion when investing funds in aggregate production factors "capital" and "la-bor". So, if this ratio greater than one, it will indicates that the actual fund-equipment of higher than optimal. In this case we can talk about the excessive cost of capital towards the production funds, compared with funds for salaries. And the food industry should reduce basic production assets, the cost of raw materials and so on. Or increase the payroll by bringing in additional workers, strengthening their financial incentives. It is clear that the situation less than one management recommendations mirror opposite: companies need to increase capital-labor ratio.
A new interpretation of the marginal rate of the substitution of the resources is determined as an in-dicator of the disparities by investing funds in the aggregate factors "capital" and "labor". The marginal rate of the substitution of the resources based on the capital-labor ratio can be one of the important additional fea-tures by using the production functions in the analysis of the output of the enterprises of the food industry of Ukraine


Referencs

1. Kleiner, H. B. (1986). Proyzvodstvennue funktsyy : Teoryia, metodu, prymenenye. M.: Fynansu y statystyka.
2. Vynn, R., & Kholden, K. (1981). Vvedenye v prykladnoi ekonometrycheskyi analyz. M.: Fynansu y statystyka.
3. Kazakova, M. V. Retrieved March 3, 2016, from ftp://ftp.repec.org/opt/ReDIF/RePEc/rnp/wpaper/31.pdf
4. Kabaka, A. F., & Protsenka, O. V. (2003). Ekonometriia. Odesa: NMTsO-ODEU.
5. Iankovyi, V. O. (2006). Prediction of the breakeven investment zone in the baking industry by means of the production function. Visnik Sotsialno-ekonomichnih Doslidzhen, 22, 410-414.
6. Cherevko, I. V. (2007). Optymalna fondoozbroienist ta pochatkovyi kapital. Visnyk Sotsialno-ekonomichnykh Doslidzhen, 26, 359-365.
7. Kmenta, J. (1967, June). On Estimation of the CES Production Function. International Economic Review, 8(2), 180-189.
8. Kubynyva, M., Tabata, M., Tabata, S., & Khasebe, I. (1991). Matematycheskaia ekonomyka na personal-nom kompiutere. M.: Fynansu y statystyka.

DOI:

Download PDF