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 Keywords: Trade Liberalisation, Total Factor Productivity, Manufacturing Sector of Pakistan
For a long time, services were considered non-tradable in the literature of international economics. However, the sector has emerged with profound importance on the basis of strong underpinnings. Technological advancement, financial constraints and limited options, and regulatory changes have greatly expanded the range and scope of trade in services especially in the context of increasing share of knowledge intensive products at the world market. Services now account for a substantial and rising share of output and employment in the economy of Pakistan and its trading partners. However, it is argued that the growing share of services in the economy of Pakistan and its trading partners has not translated into a significant increased share in their over-all trade. Pakistan is heading towards liberalisation of trade in services through unilateral, bilateral, multi-lateral agreements under the broad framework of WTO. Recently, in the wake of trade liberalisation in EBOPS services among Pakistan‘s trading partners; Pakistan has received request lists from its trading partners in the context of national treatment and market access under four modes of cross-border supply of WTO framework. In this regard, the opportunities as well as risks associated with trade liberalisation depend primarily on the relative competitiveness among the trading partners. It is, therefore, essential for the policy makers to design such a trade policy which not only helps in promoting domestic services industries but also open up new opportunities of employment generation and economic growth and development with a guarantee of peace and stability within and across its neighbouring countries. In this connection, this research paper develops a strategic framework of liberalising trade in services in 12 categories of services with 26 partner countries of Pakistan using various economics tools (RCAI, TII, TCI, TBI) and econometric models and techniques (OLS, PLS, 2SLS) by using panel data on annual and quarterly frequencies. JEL classifications: C52, C63, C87, F1, F13, F14, L8, F15, O24 Keywords: Trade in Services, Growth and Development, Trade Potential through Two Stage Least Square with Cross-section Fixed Effect Model by Using Panel Data, Trade Intensity Indices (TII), Trade Complementarity Indices (TCI), Trade Biased Indices (TBI), Revealed Comparative Advantage Indices (RCAI), Determinants of RCAI Using Pooled Least Square Method (PLS), Price and Income Elasticities Using Ordinary Least Square Method (OLS),
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