Open AccessTrade Shocks and Labour Adjustment: Evidence from Pakistan’s Manufacturing Industries
Author(s) -
Javed Iqbal,
Misbah Nosheen,
Syed Nawab Haider Naqvi
Publication year - 2015
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v54i3pp.197-214
Subject(s) - production (economics) , liberalization , economics , labour economics , manufacturing , capital (architecture) , free trade , order (exchange) , business , international economics , market economy , macroeconomics , history , archaeology , finance , marketing
The present study is an attempt to explore the impact of tradeliberalisation on employment and wages of production and non-productionworkers in large scale manufacturing industries of Pakistan. We use asample of 18 industrial establishments with a time series data coveringa period 1970-71 to 2005-06. In order to account for endogenietyproblem, this study uses the Generalised Method of Moments (GMM). Thestudy comes up with the findings that trade liberalisation hassignificantly negative impact on employment of both production andnon-production workers. On the other hand, trade liberalisation has asignificantly positive impact on wages of production workers, but it hasno significant impact on wages of non-production workers. The negativeimpact of trade is attributed to the high protection given to most ofthe inefficient industries in the post liberalisation period. On theother hand, reduction in non-production worker employment is notunexpected as in case of developing country like Pakistan, tradeliberalisation is supposed to displace capital intensive industries thatemploy most of the non-production (skilled) workers. Keywords:Production Worker, Non-production Workers, Trade, Employment,Wages