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This paper explains sectoral re-allocation as a factor underlying the jobless growth for Pakistan by using aggregated employment data for seven sectors of the economy over the time period 1967-2008. The analysis employs four commonly used measures of sectoral re-allocation proposed by Lilien (1982), Groshen and Potter (2003), Rissman (1997), and Aaronson, Rissman, and Sullivan (2004). Recent changes in the use of capital-based foreign technology have resulted in substitution of labour with non-labour inputs. Employment shifts between industrial sectors are often witnessed as indicators of structural change in an economy. The findings of this paper suggest that the economy of Pakistan underwent structural changes during the periods of recession and recovery. It appears that the structural changes were more pronounced around the time of the 1969 recession than that of 1991. A plausible explanation for this result might be the significant shifts in employment from agriculture towards the services sectors. It is concluded from evidence that sectoral re-allocation is one of the major causes of the jobless growth in Pakistan.

Can Sectoral Re-allocation Explain the Jobless Growth? Empirical Evidence from Pakistan