Pakistans Sectoral Labour Productivity In The Manufacturing Sector Economics Essay

This paper attempts contribute research to Pakistan ‘s sectoral labour productiveness in the fabrication sector, an country which has non been exhaustively explored by research workers. It seeks to analyse the factors impacting sectoral labour productiveness utilizing fixed consequence panel appraisal attack

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Pakistan labor productiveness has seen really positive growing through the period 1976-77 to 1986-87. However during 1995-96 to 2000-01, a period that besides happens to be a portion of the “ Lost decennary epoch ” , the tendencies got reversed. Fortunately, after 2001 the growing picked up and witnesses a really rapid growing.

Much accent is placed on labour productiveness in developing states, as it a prima index for societal public assistance. Improvements in labour productiveness lead to a transmutation of lower income groups in to in-between income groups ( Kemal 1981 ) . There is besides grounds that by switching more towards labour intensive procedure does hold positive impact on productiveness ( Zahid et al 1992 ) .

Pakistan fabrication sector represents about XYZ % of the entire labour force employed. Which emphasizes the importance of analyzing labour productiveness in Pakistan ‘s fabrication sector.

This paper attempts contribute research to Pakistan ‘s sectoral labour productiveness in the fabrication sector, an country which has non been exhaustively explored by research workers. It seeks to analyse the factors impacting sectoral labour productiveness utilizing fixed consequence panel appraisal attack. The paper is organized in the mode that, subdivision II reviews the literature available on labour productiveness ; subdivision III Discusses the informations and its issues ; subdivision IV the methodological analysis and Section V shall be a treatment of the consequences and findings

Literature reappraisal

There has been significant work available in economic literature explicating labour productiveness. However there are really few surveies that can be cited in Pakistan ‘s context. The productiveness research literature by and large focuses on entire factor productiveness and its account Wizarat ( 1981 ) .

Zahid et. Al ( 1992 ) surveies Capital-labour permutation and proficient efficiency in Pakistan ‘s LSM sector utilizing 17 sectors from CMI. Their findings suggested their is small benefit in replacing capital for labor in the short tally, but in the long tally this policy might better productiveness. Further grounds that re-allocating capital and labor can hold positive impact can be taken from Chang-tai ( 2007 ) . He argued that by re-allocating labor and capital to equalise fringy merchandises observed in US, 30-50 % addition in productiveness in China and 40-60 % in India Can be achieved.

Federik Huizinga ( 2004 ) survey of the Dutch Labour productiveness argued that the period 1960-1975, addition in labour productiveness can be explained by pay pushes in the 1960ss and early 1970ss, nevertheless he argued that this was neither efficient and nor was it sustainable. It was non efficient because the pay costs did non to the full reflect the scarceness of labor. The productiveness degrees were non sustained because pay pushes increased unemployment, which caused the rewards to fall down. As a consequence, in the long tally capital-labour ratios and productivenesss fell back to original values.

The impact of brotherhoods on labour productivenesss in US markets was studied by Callabller and Hammour ( 1998a ) . They found that, the net impact of brotherhoods is that the mean labour productiveness diminutions.

Another strand of literature surveies the flows of FDI and its impact on labour productiveness. FDI influxs have spillover effects in different sectors of the economic system. FDI addendums transportation of engineering and cognition, which promotes investing in R & A ; D. Studies that provide theoretical theoretical accounts associating FDI and productiveness include Barro & A ; Sala-i-Martin ( 1995 ) and Wieser ( 2004 ) .

Surveies have besides used authorities ‘s outgo ICT to explicate labour productiveness Basu et. Al ( 2007 ) and Razzak ( 2007 ) . Financial deepness has besides been used as step in explain labour productiveness ( Razzak 2007 ) and Choudry ( 2009 ) .


Value-added, no. of mean day-to-day employed, employment cost, production values has all been taken from varius issues of Census of fabricating Industries Pakistan.

Direct method of appraisal was employed ; value-added divided by figure of labour employed gave an estimation of labor. The Value-added added was adjusted by LSM deflator to give an estimation of existent value added.

Capital-Labour ratio was estimated utilizing Fixed Assets divided Cost of employment. Fixed assets were besides adjusted for rising prices by spliting with LSM deflator.

Real rewards was estimated utilizing Real cost of employment divided by mean day-to-day no. of workers employed.

Financial Depth has been estimated utilizing sectoral Credit informations divided by GDP.

Aggregate FDI has been used to gauge spillover effects.


Where one represents sectors and t represents clip. LP denotes labour productiveness. Rwage is a step of existent pay rate. Caplab is Capital over labour ratio, which is measured by Fixed assets divided by employment cost. Fin is step of fiscal deepness, estimated by spliting sectoral recognition by GDP. fdi is aggregative FDI measured by FDI influxs.




Barro, R. and X. Sala-i-Martin ( 1995 ) . Economic Growth, MIT Press.

Barro, R. J. and Lee, J. ( 1994 ) . ‘International comparings of educational attainments ‘ . Journal of Monetary Economics 32: 363-94.

Griliches, Z. ( 1994 ) . ‘Productivity, R & A ; D and the informations restraint ‘ . American Economic Review 84 ( 1 ) : 1-23.

Harris, R. , “ Is There a Case for Exchange Rate Induced Productivity Change? ” Discussion Paper No.0110, Centre for International Economic Studies, 2001

Helpman, E. and M. Trajtenberg, “ Diffusion of General Purpose Technologies: In General Purpose Technologies and Economic Growth, ( ed. ) E. Helpman: MIT Press, 1998

Huizinga, Frederik & A ; Broer, Peter “ Wage moderateness and labour productiveness ” CPB Discussion Paper No. 28, 2004

Kemal, A. R. ( 1981 ) Substitution Elasticities in Large graduated table fabricating Industries of Pakistan – A Rejoinder. The Pakistan Development Review 21:2

Mahoney, P. G. , “ The Common Law and Economic Growth: Hayek Might be Right, ” University of Virginia School of Law Working Paper 00-8, January 2000

Masood Ahmed, Qazi & A ; Kalim Hyder Bukhari, Syed ( 2007 ) “ Determinants of Entire Factor Productivity in Pakistan ” MPRA Paper No. 16253

Sachs, J. D. , “ Notes on a New Sociology of Economic Development, ” in Lawrence E. Harrison and Samuel P. Huntington ( eds. , ) Cultural Matters: How Values Shape Human Progress, Basic Books, New York, 2000.

Zahid, Shahid N. et Al ( 1992 ) “ Technical Change, Efficiency, Capital-Labour Substitution in Pakistan ‘s Large-scale Fabrication Sector ” The Pakistan Development Review 31:2

Wieser, R. , “ R & A ; D Productivity and Spillovers: Empirical Evidence at the Firm Level, ” Forthcoming at the Journal of Economic studies, Institute of Public Finance and Infrastructure Policy at Vienna University of Technology, 2004.


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