Abstract:
(Paper co-authored with Anam Yusaf and Namra Awais)
The paper reviews Pakistan’s productivity performance over the last thirty five years (1980-2015) and identifies factors which can help explain the declining trend in labour productivity especially in recent years. The paper examines, using standard techniques, the contribution to labour productivity of physical capital, human capital and TFP (total factor productivity) for the overall economy as well as for the three major sectors agriculture, industry and services. Separately the paper also examines using the Job Creation and Growth Decomposition (JOGG) tool the sectoral contributions to job generation in this period. Drawing on the results of these two exercises the paper explores how the labour market may have impacted upon labour productivity and labour absorption in the economy, given the trade-off between the two, with the sharp increase in the supply of labour over this period. In conclusion the paper identifies key factors responsible for Pakistan’s disappointing labour productivity performance as well as its inability to create more and better jobs for its fast growing labour force and the dire necessity to revive higher and sustained economic growth in the economy if this performance is to improve.
