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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,
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Suggested Citation

  • Cororaton, Caesar B. & Orden, David, 2008. "Pakistan's Cotton and Textile Economy: Intersectoral Linkages and Effects on Rural and Urban Poverty," Papers 47659, Research Reports.
    • Handle: RePEc:ags:iffp21:47659
    DOI: 10.22004/ag.econ.47659
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    References listed on IDEAS

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    1. Debowicz, Darío & Dorosh, Paul A. & Robinson, Sherman & Haider, Syed Hamza, 2012. "Implications of productivity growth in Pakistan: An economy-wide analysis," PSSP working papers 2, International Food Policy Research Institute (IFPRI).
    2. Pham Van Ha & Hoa Thi Minh Nguyen & Tom Kompas & Tuong Nhu Che & Bui Trinh, 2015. "Rice Production, Trade and the Poor: Regional Effects of Rice Export Policy on Households in Vietnam," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(2), pages 280-307, June.
    3. Caesar B. Cororaton & David Orden, 2009. "Poverty Implications of Agricultural and Non-Agricultural Price Distortions in Pakistan," World Bank Publications - Reports 28179, The World Bank Group.
    4. World Bank, 2010. "Revealed Comparative Advantage of Pakistan's Agricultural Exports," World Bank Publications - Reports 12449, The World Bank Group.
    5. Mbanda, Vandudzai & Bonga-Bonga, Lumengo, 2018. "CGE Microsimulation Analysis of Electricity Tariff Increases: The Case of South Africa," MPRA Paper 90120, University Library of Munich, Germany.
    6. World Bank, 2010. "Domestic Terms of Trade in Pakistan : Implications for Agricultural Pricing and Taxation Policies," World Bank Publications - Reports 12448, The World Bank Group.
    7. 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.

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