Export Function Estimates for the Pakistan Carpet Industry

Sam Cameron, Khair-Uz-Zaman .

Abstract


This paper explores the behaviour of exports of ‘exotic’
carpets/rugs from Pakistan over the period from 1970-2003. These rugs
are sold purely for decorative purposes mainly to the major Western
economies. This sector of world trade has been neglected by economists
as there is only one study of Iranian carpet trade [Karimi (2003)] which
has so far only been presented as a short abstract. In this paper we
review the historic background to the carpet making industry in Pakistan
and look at its current conditions of production. We then go on to
estimate an error correction model using conventional trade-related
explanatory variables which include the volatility of exchange rates
which has been increasingly a focus of such research. The results are
broadly supportive of the existing aggregate and disaggregate literature
for other countries. Given that the dominant rival supplier—Iran was
subjected to constant and varying trade volume rationing activities by
the USA, we then attempt to take this into account using measures of
Iranian trade disadvantage. These results show that the problems faced
by Iranian exporters have had a statistically significant positive
impact on the Pakistan carpet export supply function.

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DOI: https://doi.org/10.30541/v45i4IIpp.1287-1297

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