The Impact of Technological and Structural Changes in the National Economy on the Labour-Capital Relations

The aim of the research presented in this paper is to show the relations between labor and capital in the national economy, resulting from technological and structural changes taking place in the years 1991 to 2008 and to indicate of their importance for economic growth. The paper presents the functional determinants for the Polish economy in 1991-2008 affecting the phenomenon subject to study as well as the preliminary analysis of relations between capital and labor and their impact on the GDP. In the research the econometric methods of description and inference based on the concept of macroeconomic Cobb-Douglas production function in both static and dynamic approach were used. The study shows that increase in production in the national economy was largely the result of capital growth during the analyzed period. The main factor of economic growth however in the years 1998 to 2008 was the technological progress. The results may be the implication for economic policy in terms of investment and employment.


Introduction
The transformation of the Polish economy has con- Companies began to pay increasing attention to labour productivity. Available technical devices generated by the involved capital required adapting the labour resources to a level resulting from the economic calculation. The labour rationalization process is continuous and characteristic of any market economy. Only its causes change. One of them is striving to achieve a competitive advantage of companies and their further development. It should be emphasized that the increasing international mobility of production factors

The Impact of Technological and Structural Changes in the National Economy on the Labour-Capital Relations
The Impact of Technological and Structural Changes in the National Economy on the Labour-Capital Relations creates the need for flexible adjustment of resources to current market needs, which ensures maintaining competitive position on an international scale.
By making structural changes individual countries aim to reduce development disparities compared to highly developed countries. The result of the ongoing changes is the observed convergence processes. Studies by Caselli and Tenreyro (2005), Ben-David (1993) and Berman, Bound and Machin (1998)  • associated with international trade, which is explained by the creation of bigger exchange opportunities on a common market for countries integrating with those that have so far remained within the structures of a given market, • structural transformation which resulting from the reallocation of production factors between sectors of the economy (movement from sectors with low productivity of labour and capital to sectors with higher productivity).
Each of those types of convergence has an effect on changes on the labour market. It is difficult to clearly identify which one of them most significantly affected the degree of utilization of labour resources, because in 1991-2008 several processes took place simultaneously: transformation, restructuring, integration and globalization. Literature suggests that the intensity of structural changes in the national economy is high in the period of accelerated technological and organizational progress, quick economic growth, modernization of the economy, structural changes and those resulting from changes in foreign trade. All of the processes were characteristic of the Polish economy in the aforementioned years and contributed to its development and a significant reduction in the gap between the Polish economy and the world's leading economies. In terms of economic development measured by GDP per capita, Poland is still at a very distant position, even in comparison with the least developed countries of Western Europe.
In the endogenous growth models the difference in the levels of development of economies is explained not only by the accumulation of physical capital but also by the accumulation of human capital. Human capital has become a production factor expressing a certain level of technical expertise. The inclusion of technical knowledge growths to the production function as a production factor causes that the level of growth adjusted by the level of technological development depends on the accumulation of physical capital, i.e. investments and savings. It should be noted, however, that the growth rate of investment in physical capital, and therefore the savings for those investments, depends on the growth of human capital resource designed to "support" the new stock of physical capital (Pońsko, 2000).
One may find that by increasing the effectiveness of the particular production factors technological progress will contribute to the growth of competitiveness of a given country. In order to determine the impact of technological progress on the production capacity of the economy, in further considerations of this study only the impact of two production factors was examined: labour (L) and capital (C) and their impact on the GDP. In the case of the second factor, the most significant seem to be the wages and the unemployment benefits, as well as legislation influencing the labour market.
Tangible investments are the main determinant of technological changes implemented in an enterprise.
By increasing the amount of capital they contribute to the increase in the production capacity of the enterprise in the future. We must remember that a manufacturing process consumes physical capital. In order to maintain the existing capital stock it is necessary to reconstruct it. In the available sources the measure of capital accounting for both investment processes, as well as the amortisation of assets (depreciation) is the net value of fixed assets.   The empirical research conducted by Ripatti and Vilmunen (2001) for the economy of Finland shows that clear complementarity (low substitution rate) occurred between capital and labour. This example appears to be particularly interesting because of the strong technological changes and structural adjustments that occurred in that country after 1990. The authors of the study explain the low substitutability level between capital and labour with the nature of technological progress dominant in Finland. There occurred the so-called Schumpeter process of destruction of jobs with low productivity level (Ripatti & Vilmunen, 2001;Wojtyna, 2010). They concluded that the low elasticity of substitution of labour and capital does not result from the specific structure of economic institutions in a given country (e.g. USA and Finland), but rather reflects the aspects of technology and production (Jalava, Pohjola, Ripatti & Vilmunen, 2006).

Research Methodology
In order to achieve the defined empirical objective econometric methods of description and inference were used. These methods help review the operation of overall economic rules in relation to specific communities.
The most commonly used methods to describe the relation between capital and labour on the one hand and product on the other are two functions: CES and Cobb-Douglas. There has been a discussion going on in the literature for years on the advisability of using these functions (Mulat, 1980). Both have advantages and disadvantages. The CES function occurs in many variants allowing to conduct research using spatial or time series data, and allows the estimation of elasticity of substitution of production factors. In its original form it is criticized as overly restrictive because of the assumption of no impact of technological progress on the marginal productivity of production factors. The Cobb-Douglas function is simple in terms of estimating the parameters that determine production flexibility against the changes of labour and capital (Tokarski, 2003), but it is criticized for being generally easily adaptable to empirical data, even if it does not provide a satisfactory economic interpretation (Miller, 2008;Aiyar & Dalgaard, 2009). Initial estimates made by the authors during the study period show that the elasticity of substitution of production factors is close to one. Therefore, the authors decided to use the Cobb-Douglas production function. The Cobb-Douglas production function in its general form can be presented as follows: where: Y -production volume, C -capital expenditures, L -workload, α -parameter projecting production growth if the workload increases by one.
It results from the characteristic of the power function that the flexibility of the Cobb-Douglas function against (C) and (L) is constant and equal respectively: Therefore, if -ceteris paribus -the amount of capital increases by 1%, the production volume increases by α 1 %, and with the increase in workload by 1% the production volume increases by α 2 % (subject to capital stability production against the scale of outlays. This elasticity is equal to the degree of homogeneity of function 1 : Thus, if all production factors simultaneously increase by 1%, the production volume will increase by (α 1 + α 2 )% In order to measure the impact of technological change on the production value, it is necessary to choose the form of aggregate production function, which is associated with the adoption of certain assumptions on the structure of relations between the production factors and the impact of technological progress on them. For statistical data presented in the form of time series a dynamic Cobb-Douglas is often used which takes the following form: The time variable t represents the so-called technical progress factor which means that the same level of labour and capital outlays leads to an increase in production. Therefore, we can say that in every period the value of production increases e α3 times, i.e. the relative increase in the production value is e α3 -1.
The initial task in the construction of an econometric model is to define the independent variables. The selection criterion should be the substantive knowledge of the studied phenomenon. One should choose such factors (independent variables) that have a significant influence on the phenomenon studied (dependent variable). In this article, the production measure Y is the GDP at current prices, the value of labour L is the average employment in national economy and the capital C is the value of net assets. Adopting the net value of fixed assets as a measure of capital can be debatable. The authors realise that the depreciated fixed assets may still be used in production processes and thus increase the GDP. In the Cobb-Douglas model, the capital may be the gross value of fixed assets (Tokarski, 2010). However, it appears that the measure of capital proposed in this paper -the net value of fixed assets -is consistent with the economic theory. The future capital resources may vary from the accumulated capital resources C 1 in two ways. First, new capital can be invested (I). Secondly, amortisation may partially reduce the value of the capital resources.
The new capital value will then amount to C 2 = C 1 + I -δC 1. Where: C 2 is the new capital resources, C 1 -former capital, I -gross investments, δC 1 -amortisation. C 2 corresponds to the net value of fixed assets. In order for the capital resources (C 2 ) to grow, new investments must exceed amortisation (Burda & Wyplosz, 2000). That measure of capital also provides greater diagnostic capabilities. By indicating the extent to which gross GDP depends on the value of this indicator, it draws the attention to the reconstruction and modernization processes increasing the efficiency of capital.

Research results
In the first years of transformation of Polish economy (1990)(1991)(1992)(1993)(1994)  In addition, it was necessary to draw attention to the specificities of the economy, under which these models were created. They are frequently based on statistical data from countries with a far different level of economic development than the country the model is to refer to (Zienkowski, 2002).
The European Commission's Report of October 1999 showed that Poland (Ćwikliński, 2000) was evalu- In the years 1998-2008, the average employment rate in the national economy showed some fluctuations.
Until 2005, the average number of employees had been systematically declining. In subsequent years a systematic growth could be observed. In 2008, the average level of employment in the national economy was similar to that of 1998 adopted in this study as the base year and amounted to nearly 9,900 thousand people.
In 1999-2004, both GDP growth and the net value of fixed assets were characterized by a significant increase.
By contrast, employment fell systematically. One can venture to say that in the years covered by the study, the GDP growth was largely affected by the increased investment in physical capital, which probably contributed to the further restructuring of employment.
In 1999, the pace of GDP growth and the net values of fixed assets were approximate and both reached over  Clark (1940); Fourastie (1954) and Fisher (1939), but also of structural changes arising from economic transition. In order to eliminate the influence of the last of the factors on the course of economic processes the period of research was limited to the years 1998-2008.
In order to determine the flexibility of production against labour and capital in the period under study, both the static function, given in formula (1) as well as dynamic, presented by equation (4) were estimated. Therefore, we say that 1% increase in capital resulted during the analysed period in the increase of production of 1.18%, provided the employment level was maintained. While 1% increase in employment contributed to the increase of production by 0.29%, provided the capital level was stable. This means that the production growth was mainly the result of capital growth. In this case, the changes are explained by the neoclassical theory of convergence. Table 3  Interpreting the results of the evaluation, we say that in the analysed period 1% increase in capital measured with the net value of fixed assets contributed to an 0.65% increase of the GDP, provided the stability of employment was maintained. While a 1% increase The Impact of Technological and Structural Changes in the National Economy on the Labour-Capital Relations in average employment in the economy caused the GDP growth of 0.27%, with stable capital levels. In the period in question, the average annual GDP growth amounted to 3.25% due to technological progress.
This means that the main factor behind the economic growth in 1998-2008 was the technological progress taking place in the economy.

Conclusions
Both the static and the dynamic function describe well the relations between production on the one hand and capital and labour on the other. In both cases, the la-bour factor was statistically less significant than the capital factor.
Changes in the net value of fixed assets (capital) influenced the GDP growth stronger than changes in employment. This follows from the fact that in the years 1998-2008 there was a low negative correlation between GDP and labour, with a strong and positive correlation between GDP and capital. The obtained results confirm the specificity of the national economy undergoing structural changes requiring in the first place increased investments in fixed assets and replacing labour-consuming technologies with labour-sav-  ing ones. The dynamic Cobb-Douglas function shows that the GDP growth during a given period determined technological progress. It probably contributed to changes in employment levels (decrease) resulting from the increase in labour productivity.