Employment Aspects of Industrial Growth: A Correction

In the Summer 1974 edition of the Pakistan Development Review, Mr. Ishrat Hussain wrote an article on an aspect of Pakistan’s industrialization that has aroused considerable interest and concern in other developing countries— the impact of technology and wage rate changes on the growth of industrial employment [2,3 & 6]. While commending Mr. Hussain’s efforts in having drawn attention to this aspect of our industrial strategy, it appears necessary to point out that his analysis contains an important error in the basic data. This note therefore is intended to correct the error in the data, rework the entire analysis, and suggest reasons why the conclusions drawn by Mr. Hussain are not warranted by the evidence he presents. The principal error committed by Mr. Hussain was his failure to add the relevant variables for Karachi to the West Pakistan data in the Census of 1959-60.1 For example, Table III of his article shows West Pakistan’s fixed capital stock for All Industry as Rs. 918 million.1 This is, of course, incorrect. West Pakistan’s capital stock in 1959-60 was Rs. 952 million+Rs. 490 million (Karachi)=Rs. 1,442 million; and a similar correction factor applies to all other variables derived from the Census of that year. As it turns out, these corrections result in sufficiently large differences in the estimates of the Labour Displacement Effect and the regression equation of changes in labour productivity on changes in wage rates and net output. A re-examination of his empirical results therefore seems warranted.