Private Sector Led Growth and the Entrepreneurship (The Mahbub UlHaq Memorial Lecture)

Dr Mehboob Ul Haq is surely an inspiration for anyone like me,who is interested in working with applied data and thinking about howthat might be used to inform economic policy in useful ways. It ispossibly application to usefully inform policies. Coming to the topic,it is important to consider two things. Firstly, what do the firmactually do, and secondly, what one should think about private sector asessentially fulfilling. Hence, there is a need to find out the mostpressing research questions that need to be considered in this regard. Iwould start with the most fundamental question i.e. what does the firmsdo? Some would say it is a straight forward question. Firm takesdifferent factors of production, sticks them together and then ends upwith some output. As economists, we traditionally think obviously aboutthe Cobb Douglas production function, which reflects concept ofproduction. I am not going to talk today about the technology andcapital, but I will discuss about workers role in production in a moreholistic / comprehensive way. Imagine a firm in Pakistan that have anumber of workers. Let us call them “N” and these workers have differentabilities and qualities, so how would one calculate the totalproductivity, output or total contribution of the labour force. Thesimplest way to do this is just to add them up and say that the totallabour contribution is the sum of the individual labourer‟scontribution. This means that if one were to improve the productivity ofthe first worker, then yes, it would improve the firm‟s productivity,however, it will not affect the productivity of any other worker of thefirm. In practice, let us suppose in a firm in Sialkot, there are twowomen workers producing soccer balls, and to know their productivity wesum their output. Hence, if one out of these two women increases herproduction, it will be imagined as the increase in firm‟s totalproductivity (without affecting the productivity of the other woman) andthat will be imagined as a good thing.