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An Investigation into the Channel of Public Expenditure to Boost Industrial Productivity in Pakistan

Author

Listed:
  • Atif khan Jadoon

    (University of the Punjab Lahore, Pakistan.)

  • Syeda Azra Batool

    (Bahauddin Zakariya University Multan, Pakistan.)

  • Ambreen Sarwar
  • Maria Faiq Javaid

    (University of the Punjab Lahore, Pakistan.)

  • Dur a Shahwar

    (Bahauddin Zakariya University Multan, Pakistan.)

Abstract

It is a fact that public expenditure has a strong association with industrial productivity. The industrial sector recorded slow growth of 5.43%, which adds 20.90% to the GDP of Pakistan (2017-2018). This study aims to find the effects of public expenditure on Total Factor Productivity (TFP) in the industrial sector of the country. The study constructed two different models. In the first model, the study used time series data from 1975 to 2018, and the growth of adjusted TFP was calculated by the growth accounting method. In the second model, the study collected data from 1977 to 2018 and checked the impact of government expenditure on the TFP growth in the industry. The unit root tests, Ordinary Least Square (OLS), and Vector Error Correction Model (VECM) were employed. The findings of the study revealed that public expenditures on education were significant and positively related to TFP growth in industries. Public expenditure on health, agriculture, and inflation had a significant and positive association with TFP growth in the industries. Foreign direct investment had a negative but significant impact on TFP growth. The results of the present study suggest that industrial productivity can be increased by increasing the expenditure on education and health.

Suggested Citation

  • Atif khan Jadoon & Syeda Azra Batool & Ambreen Sarwar & Maria Faiq Javaid & Dur a Shahwar, 2021. "An Investigation into the Channel of Public Expenditure to Boost Industrial Productivity in Pakistan," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 3(2), pages 93-105, September.
    • Handle: RePEc:ani:irdjoe:v:3:y:2021:i:2:p:93-105
    DOI: https://doi.org/10.52131/joe.2021.0302.0028
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    More about this item

    Keywords

    Total factor productivity; Foreign direct investment; Public expenditure; Health; Agriculture;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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