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

Abstract

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