The striking large investments in the wood manufacturing industry especially after the fi1ip provioed bv the increases in oil revenue, in its turn will change the production technology has been used by this industry. This changes, undisputed1y will have a profound impact on labour absorption and labour productivity. The wood manufacuring industry has been the focus on this thesis since most of the studies on wood maufacturing industry in Indonesia until the time being, were mostly laying the stress on their production capacity and export performances. Less attention or studies has been undertaken in discussing the production technology and its impacts on labour acsorption and labour productivity which are accounted to be one of the most important factors for success in increasing export performances. stUdY are: the production capacity as well Specifically, tne objectives of the as this 1. To review the changes and trendS of production tecnniques in the wood manufacturing indusry. 2. To estimate the changes in labour acsorption or its empioyment elasticity. 3. To estimate the value of the elasticity of substitution in this industry . . 4 . . To estimate the changes in laoour producti.vity in this industry. Based on the past experieces and previous studies discussing the similar topiC, tne study in tnis thesis also utili~ing the Constant Elasticity of SUDstitution (CES) production function as a theoritical baCKground of tne analysis. The labour demand function and lacour prOductivity were derived from the CES production function. The economic parameters of these functions were estimated after changing its mathematical forms into its statistical regression mOdels. By evaluating the capital-labour ratio (K/L), it can be concluded whether the wood manufacturing industry tenos to be capital intensive or VIce versa.