Abstract

The objectives of this paper were to study effects of human capital and international trade orientation on the output and total factor productivity in Pakistan. The output and Total factor productivity have been estimated using Cobb-Douglas Production function linking per worker output, per worker capital as well as labor force including and excluding the human capital stock for the period of more than five decades from 1961 to 2013. The data was taken from various secondary sources including Pakistan Bureau of Statistics, State Bank of Pakistan and from various issues of Economic Surveys published by Ministry of Finance and was analyzed using SPSS. The role of potential determinants of output as well as total factor productivity such as human capital, exports, imports, FDI, Government consumption expenditure, education expenditure, capital labor ratio, GDP per capita, life expectancy and population have also been analyzed. According to the results the prevalence of decreasing return to scale was observed in all specification of the estimated production functions. Results also exhibit that the physical capital and employed labor force as significant determinants of output. Human capital becomes significant determinant of output when it is interacted with physical capital and employed labor force. An increasing trend in the output and productivity over time has been observed except during the 1970s. Human capital alone as well as its interaction with physical capital has been emerged as significant determinants of total factor productivity. The capital-labor ratio has also been found as significant determinant of productivity. The findings of the study advocate for more investment in both physical as well as human capital in order to increase the output and productivity in the long run.

Keywords:

Human capital, output, Pakistan, total factor productivity, trade,

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