Employment Creation Effects of Pakistan’s Exports

During the past two decades, an increasing number ofdeveloping countries have sought to pursue export -oriented trade andindustrial policies as against the import -substitution strategy ofindustrialization.1 It has been argued that production for the worldmarket not only restores the momentum of industrial growth but it leadsto efficient resource allocation, greater capacity utilization, permitsthe exploitation of economies of scale, generates technologicalimprovement in response to competition abroad and, most importantly,creates productive employment opportunities for a labour-surplus country[Balassa (1978), p. 180). This paper is not concerned with the merits orotherwise of export -oriented trade and industrialization policiesrather we concentrate on the most important contribution of outwardlooking or export-oriented policy, i.e., its employment creationeffects. It has been argued that an increased level of activity in theexport sector gives rise to dynamic external economies of scale besideshaving its own direct effect. For example, an increase in exportscreates jobs for workers directly engaged in the production of theexport commodities. This being the direct effect, an increase in exportsalso creates employment via the linkage effect, multiplier effect andforeign exchange effect.2 A large number of studies over the last twodecades have attempted to measure the direct and indirect contributionsof exports in employment creation in developing countries.3 Almost allstudies have used static input-output analysis to quantify thecontribution of exports in employment generation.