Impact of Trade Policy on Large Scale Manufacturing Industries of Pakistan: An Econometric Analysis
Author: Gulzar Ahmed

Pakistan manufacturing sector has been confronting high tariff rates, import substitution policies and other trade impediment since 1980s, which caused reduction in industrial productivity due to underutilization and misallocation of resources and technological inefficiency. This study empirically analyzed the pre and post liberalization trade policy impact on total factor productivity (TFP) by using pooled data of 27 manufacturing industries of Pakistan. Consistency in the face of simultaneity TFP for pre-liberalization (1981-1995) and post-liberalization (1996-2006) periods was estimated following Levinsohn and Patrin (2003) methodology. Production elasticities with respect to each input (capital, labour, raw material and energy) were estimated by using Cobb. Douglas production function. Output elasticities in terms of inputs were found positive for pre and post-liberalization period; which also proved the assumption of elasticity substitution equal to unity. However, output elasticity with respect to energy was negative in post-liberalization period, perhaps due to energy crisis. Results indicated that excise duty has positively impact on TFP in pre and post-liberalization periods; however, its coefficient is very small and considered to be negligible effect on TFP. Effective rate protection which is used as trade policy proxy exerts large negative effect on TFP in post-liberalization (1996-2006) than pre-liberalization (1981-1995). Results of this study implied that it is pre-requisite to eliminate trade barriers and protection policies for technological advancement and industrial development. Supervisor:- Dr. Muhammad Arshad Khan

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Keywords : Econometric Analysis, LARGE SCALE MANUFACTURING, Manufacturing Industries, Manufacturing Industry-Pakistan, Manufacturing Sector-Pakistan, Trade, Trade Policy
Supervisor: Muhammad Arshad Khan

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