trade liberalisation and industrial productivity evidence from manufacturing industries in pakistan

Authors

  • Muhammad Arshad Khan
  • Muhammad Afzal
  • Tahir Mahmood

Abstract

This study examines the impact of trade liberalisation on the industrial productivity for a panel of twenty seven 3-digit manufacturing industries in Pakistan over the period 1980-2006. Using a variant of the Cobb-Douglas production function for industrial sector, we estimated output elasticities. The results show positive output elasticities with respect to labour, capital and raw materials for the pre-trade liberalisation period (1981 –1995) as well as post-trade liberalisation period (1996-2006). For the pre-liberalisation period, we observe positive output elasticity with respect to energy, while it turns out to be negative in the post-liberalisation period probably due to energy crisis in Pakistan. In the second stage, we calculate total factor productivity (TFP) and examine the impact of trade liberalisation on TFP for pre-and post-trade liberalisation periods. The results reveal that trade liberalisation proxied by import duty has positive but negligible impact on the TFP in the pre-as well as post-liberalisation periods. On the other hand, effective rates of protection exert large negative impact on the TFP in the post-liberalisation than the pre-liberalisation period.

 

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Published

2023-01-10

How to Cite

Muhammad Arshad Khan, Muhammad Afzal, & Tahir Mahmood. (2023). trade liberalisation and industrial productivity evidence from manufacturing industries in pakistan. The Pakistan Development Review, 61(3). Retrieved from https://thepdr.pk/index.php/pdr/article/view/2875

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