Factor Utilisation in Manufacturing: Evidence from Pakistan.

Sahar Amjad Shaikh, Bisma Haseeb Khan

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 under-utilisation
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. JEL classification: L60, O53, J20, C23, D24
Keywords: Manufacturing, Pakistan, Labour, Panel Data, Production
Function

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DOI: https://doi.org/10.30541/v50i4IIpp.515-529

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