TOTAL FACTOR OF PRODUCTIVITY AND ITS COMPONENTS: EVIDENCE FROM CEMENT - AND ENERGY SECTORS OF PAKISTAN

Razzi Abbas Jafri,Shahbaz Khan,Nida Baig,Muhammad Haroon Shah

doi:10.24212/2179-3565.2018v9i1p55-73

Abstract

This study employs “Data Envelopment Analysis (DEA)” method to calculate the “Total Factor Productivity (TFP)” growth and its components of 19 non-financial firms from Cement and Energy sectors of Pakistan listed on ISE-100 Index during the time period 20052011. The research focuses on to identify the factors like, technical change and technical efficiency change tends to influence the TFP of cement -and energy sectors of Pakistan. We use hand collected data from the annual reports of these non-financial firms included in our sample. Results show that cement sector has an overall positive TFP growth of 9.7%, and energy sector has an overall TFP growth of 1.5% during the study period. The study may assist us to recognize the extent to which these components can affect the TFP of a sector, and will further help us to explore new ways to boost up the productivity of these sectors which in turn may be beneficial to move country towards a sustainable path.

Highlights

Having its major role in the development of infrastructure, cement sector stayed to contain vital rank among all industrial sectors (Schneider et al, 2011)
Pakistan is among the highest population growth rate countries (Pew Research Center, 2014), which procedurally increases the demand for housing facilities
DEAP does not work for negative values while net profit is such a variable which can be negative in case of loss, profit is not appropriate output variable

Summary

INTRODUCTION

Having its major role in the development of infrastructure, cement sector stayed to contain vital rank among all industrial sectors (Schneider et al, 2011). METHODOLOGY Total factor productivity is the ratio of multiple outputs to multiple inputs and is one of the major tools in evaluating the performance of any firm as well as assessing overall economic growth of a country (Chen 1997; Baier et al, 2006; Po-Chi et al, 2008). Input and Output variables DEA approach can be applied to those sectors/firms, which wants output in the form of revenue For this purpose, we will use technical efficiency equivalents for calculating the firm’s financial performance. DEAP does not work for negative values while net profit is such a variable which can be negative in case of loss, profit is not appropriate output variable The solution of this problem lies in changing the input variables as total assets, SH equity, COGS and operating expenses while sales revenue of the firm as output”. In the end 19 firms were possible to be included in our study i-e., 11 firms from energy sector and 8 firms from cement sector

RESULTS AND DISCUSSION

CONCLUSION

FINDINGS