Abstract
The objective of this study is to endorse the driving factors behind total factor productivity (TFP) and economic growth in Pakistan. Pakistan’s average growth rate is 5% for last few decades, and although this growth level is satisfactory, Pakistan faced several formidable challenges yet. The economic growth has been determined mainly through labor-intensive technology and export-oriented manufacturing activities. However, TFP is assessed from the aggregate production function using the Cobb–Douglas production function that permits for the simultaneous expansion of outputs and contraction of inputs. The annual timer series data have been extracted from 1972–2016 World development Indicator (WDI) for this study. The overall results reveal that almost all variables are statistical significant. Moreover, innovation significantly contributes to economic growth and production level in Pakistan. This analysis may have significant suggestions to policy makers in Pakistan and other emerging economies when framing sustainable growth policy.
Highlights
Recent economic growth theories draw devotion toward endogenous technological change, which describes the growth patterns of world economies
There is no clear indication determining whether there is a casual association between innovations and economic growth through productivity or whether these both procedures occur at a time in developing countries such as Pakistan
3.2 The total factor production and its potential drivers This paper describes the direct sources of total factor productivity (TFP) by modeling TFPG as a function (f) along with a set of potential variables
Summary
Recent economic growth theories draw devotion toward endogenous technological change, which describes the growth patterns of world economies. Romer (1986) established an endogenous growth model in which technological innovation was formed in the research and development (R&D) areas including human capital and the existing knowledge stock. It was used in the production of all final goods and led to permanent rises in the output growth rate. There is no clear indication determining whether there is a casual association between innovations and economic growth through productivity or whether these both procedures occur at a time in developing countries such as Pakistan. Answering this query has critical relevance for Pakistan since unconventional answers lead toward different policy recommendations regarding innovation and technology policies
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