Unveiling the TFP Nexus with ICT and IPRs: An Empirical Analysis of Textile & Apparel Industry of Pakistan

Abstract

Textile and apparel industries of Pakistan are the largest industrial sector contributing about 60% to total exports and 25% of value-added of the manufacturing sector. The degree of competitiveness in this sector is closely associated with their Total Factor Productivity (TFP), which can be enhanced through trade liberalization, efficient and effective use of Information and Communication Technology (ICT), protection of intellectual property rights (IPRs) along with the investment in human capital, and advertisement expenditures. Additionally, investment in machinery and equipment and the role of subsidies cannot be ignored in enhancing TFP growth. This study utilizes data from the 2005-06 Census of Manufacturing Industries. Total factor productivity has been calculated employing the methodology of Tomiura (2007). The results indicate TFP is positively and significantly affected by ICT, IPRs, investment in machinery & equipment, human capital, import duties, subsidies for exports on TFP growth. The safeguarding textile and apparel industries from foreign competition relocates resources towards improving TFP whereas incorporation of ICT and IPRs enables firms to realize benefits of foreign developed technology which further improves TFP growth. Furthermore, the effect of advertising expenditures on TFP is positive but it lacks statistical significance.