Macro Determinants of Total Factor Productivity in Pakistan

Abstract

By utilizing the conventional growth accounting framework, this study first estimates the Total Factor Productivity (TFP) in Pakistan and then establishes its macro determinants. Covering the sample from 1960 to 2003, the results confirm that macroeconomic stability, foreign direct investment, and financial sector development play an important role in the increase of TFP. Interestingly, education expenditures turn out to be insignificant.