The Employment Creation Effects of Factor Subsidies: Some Estimates for Northern Ireland Manufacturing Industry, 1955‐1983

In this paper, I use estimates of the parameters of an industry demand function and a CES production function for Northern Ireland manufacturing in order to measure the relative impact of factor subsidies on employment, capital, and output. A simulation model is able to differentiate the output and substitution effects of subsidies. The results indicate that since manufacturing industry in the province tends to operate with a labor‐intensive technology and, since its price‐elasticity of demand for output is very low, the employment creating effects of capital subsidies are strongly negative.