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Trade Liberalisation and Industrial Productivity: Evidence from Manufacturing Industries in Pakistan

Author

Listed:
  • Gulzar Ahmed

    (Ministry of Planning, Development and Reform, Government of Pakistan)

  • Muhammad Arshad Khan

    (Department of Management Sciences, COMSATS Institute of Information Technology, Islamabad.)

  • Tahir Mahmood

    (Department of Economics, University of the Punjab, Lahore)

  • Muhammad Afzal

    (MPhil Scholar, Forman Christian College University, Lahore.)

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. JEL Classifications: F14, F13, O53, L60

Suggested Citation

  • Gulzar Ahmed & Muhammad Arshad Khan & Tahir Mahmood & Muhammad Afzal, 2017. "Trade Liberalisation and Industrial Productivity: Evidence from Manufacturing Industries in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 56(4), pages 319-348.
    • Handle: RePEc:pid:journl:v:56:y:2017:i:4:p:319-348
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    Citations

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    Cited by:

    1. Gonzalo Varela & Juan Pedro Gambetta & Federico Ganz & Andreas Eberhard & Sebastian Franco & Stefania Lovo, 2020. "Import Duties and Performance," World Bank Publications - Reports 33886, The World Bank Group.
    2. Jamil Nasir, 2020. "The Tariff Tripod of Pakistan: Protection, Export Promotion, and Revenue Generation," PIDE-Working Papers 2020:6, Pakistan Institute of Development Economics.
    3. Jamil Nasir, 2020. "The Tariff Tripod of Pakistan: Protection, Export Promotion, and Revenue Generation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(3), pages 517-551.

    More about this item

    Keywords

    Trade Liberalisation; Total Factor Productivity; Manufacturing Sector of Pakistan;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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