Internationally Linked Firms and Productivity in Pakistan: A Look at the Top End of the Distribution

This paper examines productivity drivers for Pakistani publicly listed firms from 2012 to 2017, with a focus on policy and outcome measures of integration in upstream sectors. We find that increased import duties on intermediates, and reduced FDI in upstream services, are associated with a reduction in productivities downstream. Gains from lower input tariffs accrue to firms that cannot secure duty exemptions—domestic-oriented firms and smaller exporters. Gains from upstream services FDI accrue mostly to firms that are further from the productivity frontier. Our results suggest that productivity growth in Pakistan would benefit from increased exposure of upstream sectors to global markets.