Trade Liberalization and Labor Demand Elasticities: A Firm-Level Analysis of Pakistan’s Manufacturing Sector

Abstract

The study investigates the linkage of trade liberalization and labor demand elasticities in Pakistan. The panel data are used by selecting 13 industries in Pakistan's manufacturing sector for the years 1995-1996, 2000-2001, and 2005-2006. The Pooled OLS technique is applied to get the estimates at an aggregated level and disaggregated levels. Overall findings support the positive relationship between trade liberalization and labor demand elasticity in production workers but in the case of non-production workers, the findings show the weak relationship between trade liberalization and labor demand elasticity. The study is also furnished with some policy recommendations.