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Pakistan's cotton and textile economy: Intersectoral linkages and effects on rural and urban poverty

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  • Cororaton, Caesar B.
  • Orden, David

Abstract

"Pakistan's economy relies heavily on its cotton and textile sectors. The cotton-processing and textile industries make up almost half of the country's manufacturing base, while cotton is Pakistan's principal industrial crop, supplying critical income to rural households. Altogether, the cotton-textile sectors account for 11 percent of GDP and 60 percent of export receipts. The future of this vital component of the national economy is uncertain, however. These industries face the challenges of unstable world prices and increased competition resulting from global liberalization of the multilateral textile and clothing trade. At the same time, Pakistan's macroeconomic situation is volatile. Given such challenges and volatility, this study investigates what the future might hold for Pakistan's cotton and textile industries and its implications for rural and urban poverty reduction in the country. The study uses a computable general equilibrium (CGE) model calibrated to a 2001–02 social accounting matrix of the Pakistan economy to conduct experimental simulations of possible economic changes. The CGE model results are linked to the nation-wide 2001–02 Pakistan Household Integrated Economic Survey to examine the implications the simulated developments have for Pakistani poverty. Simulation 1 examines the effects of a doubling of foreign capital inflows, as occurred from 2002 to 2006, before a subsequent financial crisis emerged in 2008. Simulation 2 analyzes the counterfactual effects of an increase in world prices of cotton lint and yarn and/or textiles which would have offset declines experienced in the late 1990s and early 2000s. Pakistan's strong textile association motivates Simulation 3, which examines the effects of a 5-percent increase in government production subsidies to the industry. Simulation 4 uses a dynamic-recursive version of the model to analyze the short- and long-run effects of a 5-percent increase of total factor productivity (TFP) in cotton, lint and yarn, and textile production." from text

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series Research reports with number 158.

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Date of creation: 2008
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Handle: RePEc:fpr:resrep:158

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Keywords: Textile industry; Rural-urban linkages; Poverty reduction;

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References

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  1. David Orden & Abdul Salam & Reno Dewina & Hina Nazli & Nicholas Minot, 2006. "The Impact of Global Cotton and Wheat Prices on Rural Poverty in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(4), pages 601-617.
  2. Gillson, I & Poulton, Colin & Balcombe, Kelvin & Page, S, 2004. "Understanding the impact of Cotton Subsidies on developing countries," MPRA Paper 15373, University Library of Munich, Germany.
  3. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  4. Dorosh, Paul & Niazi, Muhammad Khan, 2006. "Social Accounting Matrix for Pakistan, 2001-02: Methodology and Results," MPRA Paper 2242, University Library of Munich, Germany.
  5. Decaluwé, Bernard & Dumont, Jean-Christophe & Savard, Luc, 2000. "Measuring Poverty and Inequality in a Computable General Equilibrium Model," Cahiers de recherche 9926, Université Laval - Département d'économique.
  6. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  7. Stephen Tokarick, 2003. "Measuring the Impact of Distortions in Agricultural Trade in Partial and General Equilibrium," IMF Working Papers 03/110, International Monetary Fund.
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Cited by:
  1. World Bank, 2010. "Revealed Comparative Advantage of Pakistan's Agricultural Exports," World Bank Other Operational Studies 12449, The World Bank.
  2. World Bank, 2010. "Domestic Terms of Trade in Pakistan : Implications for Agricultural Pricing and Taxation Policies," World Bank Other Operational Studies 12448, The World Bank.
  3. Nazli, Hina & Sarker, Rakhal & Meilke, Karl D. & Orden, David, 2010. "Economic Performance of Bt Cotton Varieties in Pakistan," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61181, Agricultural and Applied Economics Association.
  4. Cororaton, Caesar B. & Orden, David, 2009. "Poverty Implications of Agricultural and Non-agricultural Price Distortions in Pakistan," Agricultural Distortions Working Paper 52789, World Bank.

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