TOTAL FACTOR PRODUCTIVITY GROWTH IN INDUSTRIAL AND SERVICES SECTORS OF PAKISTAN’S ECONOMY SINCE 1973

Sustainable output growth is one of the most crucial priorities of development economics and macroeconomic policies. Continuous growth in productivity is thought to be crucial for improving living standards. It is of greater importance to developing countries due to a variety of economic problems such as poverty, unemployment, inflation, and a trade deficit. A major source of output growth is total factor productivity (TFP). By integrating factor inputs, it measures the effect of economic and technical efficiency on the development of the desired output. The study focused to estimate total factor productivity growth of Industrial and Services sector. For this purpose study utilize two different technique to obtain reliable estimates of total factor productivity. These technique are growth accounting technique and Malmquist indices. The study covers the period from 1973-2020. The results of the study indicate that the average TFP growth rate is higher in the period of 1981-1990. If we observed the industrial and services sector the TFP growth of these sectors also higher in this decade. But if we compare the TFP of these sectors have respectively 4.01 percent and 4.12 percent respectively. Our results shows that TFP has been lowest in the industrial sector as compared with services sector. It is, therefore, needed that government should devise appropriate policies to promote industrial sector TFP growth. It revealed that the investment should be made in this sector. Finally the study recommend that the investment should be sufficiently raised. All above empirical evidence provide sound basis to accelerate TFP growth in Pakistan