ECONOMIC GROWTH AND THE MANUFACTURING SECTOR IN PAKISTAN: The Relative Significance of the Domestic and Imported Resource Content

This study focuses on determining the significance of the imported resource content, the largest consumer of the foreign exchange earnings, relative to the domestic inputs in the large scale-manufacturing sector (LSMS) of Pakistan. The analysis also includes the causal relationship of the major manufacturing sector variables; namely manufacturing employment, investment, and exports, with the economic growth of the country, determined within a unidirectional model. The relative significance of -the domestic and imported resource content in the LSMS is determined for thirty 3-digit level industries over a period of 12 year~~ 1975-1991. The results are obtained by estimating a simultaneous equations model, i.e., applying the 3SLS technique. The findings suggest that the domestic resource content has played a significant role in determining both the output and employment in the .LSMS of Pakistan, but the estimated coefficients oithe imported resource content variable indicate the absence of a significant relationship with the left hand side variables, LSMS output and employment, respectively.