The time profile of the cost structure in Pakistan's manufacturing sector

This study finds that the manufacturing sector of Pakistan has experienced a slight decline in total factor productivity, which can be attributed to various distortions such as over-employment in public sector, misdirected pricing policies and lack of financial discipline. The study further shows that the elasticity of substitution between energy and non-energy factor inputs has increased over time, therefore factor proportions are likely to adjust in the light of rising energy prices. However, the study observes that energy intensity has increased over the years, while capital intensity has declined. This factor bias could have resulted from factor market distortions such as non-payment of energy charges resulting in reduced effective unit cost of energy and import of energy intensive machinery, while labour intensity did not decline due to over-employment of labour in public sector. (Pak Dev Rev/DÜI)