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Factor Utilisation in Manufacturing: Evidence from Pakistan

Author

Listed:
  • Sahar Amjad Shaikh

    (Centre for Research in Economics and Business, Lahore School of Economics, Lahore)

  • Bisma Haseeb Khan

    (Centre for Research in Economics and Business, Lahore School of Economics, Lahore)

Abstract

During the past decade, Pakistan has experienced jobless growth with the employment growth in its manufacturing sector lagging behind the growth in its GDP. This is of concern as Pakistan‘s growing labour force, lacking social safety nets and financial assets, rely on employment as their sole source of income. Thus employment is the main link between economic growth and poverty reduction. This paper aims to investigate the nature of this job-less growth by using the Levinsohn and Petrin (2003) methodology to estimate the production functions for the industries and calculate the rate of factor utilisation in the manufacturing sector. Our hypothesis is that labour underutilisation may be one of the driving factors behind this jobless growth. Finding lower than optimal employment for production and non-production workers across different industries, it further tries to establish the possible links between factor utilisation, productivity and other institutional characteristics of the firm. Policy recommendations are made on the basis of this analysis.

Suggested Citation

  • Sahar Amjad Shaikh & Bisma Haseeb Khan, 2011. "Factor Utilisation in Manufacturing: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 515-529.
    • Handle: RePEc:pid:journl:v:50:y:2011:i:4:p:515-529
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    More about this item

    Keywords

    Manufacturing; Pakistan; Labour; Panel Data; Production Function;
    All these keywords.

    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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