Response of Manufacturing Sector to Financial Liberalization in Pakistan

It has been believed that financial liberalization can stimulate industrial growth which may be translated into overall growth of the economy by efficient allocation of credit which generates investment opportunities by reducing the cost of investment, deregulations, privatizations and reduced capital controls. This paper aims to examine the impact of financial liberalization on industrial response in manufacturing industry measured as new firm entry. Moreover, moderating effect of external finance dependence on the relationship of financial liberalization and firm entry is estimated. We estimate the model using Generalized methods of moments and found that external finance dependence has a significant negative impact of new firm entry, while financial liberalization has a positive but insignificant impact on firm entry. Nevertheless, a statistically significant positive moderating impact of external finance dependence is documented which implies that the sectors which are more dependent on external finance gain disproportionate benefit from financial liberalization.

What Does Political Economy Tell Us About the Dearth of Black Entrepreneurs?

There is a historical and consistent lack of parity in the Black community between labor and firms. Various authors have attributed entrepreneur-centered failures and shortcomings as the source of Black Entrepreneurship under-performance. This study, however, utilizing the Theory of Market Barriers, sought to discover the factors associated with market conditions that may play a causal role on new firm entry and coincidentally entrepreneurship choice. With count data from the Survey of Minority Owned Enterprises 1992-1997 (SMOBE), this study estimated the parameters of a Limit Profit Model to determine the effect political economic barriers have on new firm entry. The results implicate historical and ongoing biased policy generating imperfect market conditions lowering the economic value of entrepreneurial choice and hindering Black Entrepreneurship. This suggests that among the various explanations for the dearth of Black entrepreneurs, low Black labor demand and persistent high Black unemployment, barriers emanating from political economy, also appear to be important. JEL Classifications: I, J, O

The Economic Impact of New Firms in Punjab

Despite the consensus that new firms have a significant economic and socioeconomic impact, there is very little empirical evidence to support this claim in the Pakistani context. In this paper, we start by looking at how new firm entry varies across districts in Punjab over time. We then look at how the establishment of different types of firms across these districts has affected district-level socioeconomic outcomes in the province. We find that firm entry has a positive impact on economic outcomes such as employment and enrollment, and that this impact can vary by the scale of the firms that enter.