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Internationally Linked Firms, Integration Reforms and Productivity : Evidence from Pakistan (English)

This paper examines productivity dynamics and drivers for Pakistani firms listed in the stock exchange (publicly listed firms) over 2012-17. It relies on policy and outcome measures of integration in upstream merchandise and services sectors, to assess their impact on productivity downstream. The paper presents three main findings. First, the productivity of publicly listed firms remained stagnant over the period, in line with macro-level indicators for Pakistan. Second, foreign-owned or exporting firms are more productive than domestic-owned or domestic-oriented firms. Foreign investors target more productive firms, and their productivity grows after being acquired. Exporters tend to exhibit productivity growth after becoming exporters. Third, increased import duties on intermediates, or reduced levels of foreign direct investment in upstream services sectors, are associated with decreases in the total factor productivity of firms downstream. Gains from lower input tariffs accrue to those that do not secure duty exemption schemes -- domestic-oriented firms or smaller exporters. Gains from upstream services foreign direct investment accrue mostly to firms that are further from the productivity frontier. Taken together, these results suggest that productivity growth in Pakistan would benefit from increased exposure of upstream sectors to global markets.

Details

  • Author

    Lovo,Stefania, Varela,Gonzalo J.

  • Document Date

    2020/08/03

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS9349

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Pakistan,

  • Region

    South Asia,

  • Disclosure Date

    2020/08/03

  • Disclosure Status

    Disclosed

  • Doc Name

    Internationally Linked Firms, Integration Reforms and Productivity : Evidence from Pakistan

  • Keywords

    trade and investment; trade and investment policy; balance of payment crisis; efficient allocation of resource; Oil and Gas Sector; Cost of Doing Business; system of import duty; total factor productivity; share of export; foreign direct investment; import duty exemption; aggregate productivity growth; reduction in tariffs; increase tariff; types of firms; letter of intent; factor of production; extent of competition; cost materials; department of economics; customs duty exemption; terms of sale; changes in output; current account deficit; access to financing; reallocation of resource; within-firm productivity growth; measures of integration; capital per worker; stock of capital; rate of change; input-output table; trade policy decisions; rate of growth; access duty; duty exemption scheme; cost of access; impact on productivity; trade policy reform; choice of variables; intermediate input; manufacturing sector; foreign ownership; fixed effect; foreign investor; tariff change; standard error; exporting firms; import intermediates; productivity dynamic; linear regression; standard deviation; Trade Policies; firm level; capital deepening; average productivity; import tariff; increase productivity; duty exemptions; downstream sector; imported inputs; productivity differences; global marketplace; domestic input; export status; labor productivity; intangible asset; alternative measure; significant correlation; productivity level; perfect competition; lower tariff; data availability; foreign shareholder; weighted average; export orient; foreign acquisition; macro indicators; Financial Sector; productivity gap; causal link; industrial supplies; average change; within-firm component; tariff rate; foreign participation; time trend; productivity estimate; available data; positive growth; sectoral performance; several advantages; protectionist measure; low rate; ownership data; labor hour; capital stock; stock exchange; descriptive statistic; price product; petroleum sector; zero investment; administrative datum; global integration; tax remission; causal relationship; product quality; lower price; first stage; company exit; tobacco product; productivity shock; financial service; export flow; income statement; vertical line; total wage; external financing; constant return; tariff structure; production cost; administrative cost; vertical linkage; annual sale; fiscal deficit; financial account; export market; independent variable; private company; estimation procedure; functional dependence; high tariff; estimation method; complementary policies; firm size; export share; investment integration; export orientation; productivity increase; global economy; domestic productivity; ownership status; chemical sector; knowledge spillover; empirical literature; producing good; sectoral composition; import competition; bottom quartile; tariff reform; risky investment; liberalization process; open access; business environment; improved environment; intermediate imports; intermediate product; observed increase; imported intermediate; tariff increase; development policy; input mix; synthetic fiber; domestic price; Research Support; commercial presence; productivity change; firm-level productivity; productivity impact; downward pressure; creative destruction; market mechanism; tariff reduction; banking sector; standard approach; reducing frictions; downstream market; restrictive policy; macro data; aggregate gains; productivity convergence; administrative burden; take time; financial cost; macro level; positive relationship; substantial variation; output growth; market power; productivity distribution; imperfect market; foreign entry; controlled price; market imperfection; collected information; productivity effect; cross-sectional data

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Citation

Lovo,Stefania Varela,Gonzalo J.

Internationally Linked Firms, Integration Reforms and Productivity : Evidence from Pakistan (English). Policy Research working paper,no. WPS 9349 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/441121596474893570/Internationally-Linked-Firms-Integration-Reforms-and-Productivity-Evidence-from-Pakistan