Table 5 – Average productivity by ownership status

|Year|Domestic over<br>the entire period|Acquired by foreign owner<br>in the following year|Foreign owned<br>over entire period|Gap<br>(2) – (1)|Gap<br>(3) – (1)|Gap<br>(3) – (2)|
|---|---|---|---|---|---|---|
||(1)|(2)|(3)|(4)|(5)|(6)|
|2012|2.17|2.56|2.72|0.40***|0.56***|0.16*|
|2013|2.17|2.61|2.73|0.44***|0.57***|0.13|
|2014|2.19|2.45|2.77|0.26***|0.58***|0.32***|
|2015|2.14|2.56|2.81|0.42***|0.66***|0.25*|
|2016|2.11|2.54|2.82|0.43***|0.71***|0.28*|
|2017|2.03||2.88||0.85***||
|Whole period|2.13|2.52|2.79|0.39***|0.66***|0.26***|

Note: Difference in means tests reported with significance at *10%, **5%, ***1%. Differences in column 5 are increasing over time as the gap in 2017 is statistically larger, at 1%, than the gap in 2012 . The other differences in columns 4 and 6 are not statistically different over time. We tested differences in means also controlling for sector-fixed effects and the results are qualitatively similar.

# _Export status and productivity in Pakistan_

Export orientation, defined as the share of firms with positive exports, stands at 55 percent among Pakistani publicly listed firms. This share is three times larger than in the economy as a whole.<sup>18</sup> In Table 6 we compare, within given sectors, the productivity of three types of firms: Those that never exported over the period of analysis (‘never exporters’, column 1), those exporting in the following year (‘future exporters’, column 2), and those that exported every year during the period (‘always exporters’, column 3). The productivity premium observed for Pakistani exporting firms is – as with foreign firms – also consistent with the international evidence. Exporters are on average 25 percent more productive than domestic-oriented firms (column 5). The exporters’ productivity premium holds across sectors and size classes. Most of the productivity premium between exporters and nonexporters is driven by the difference between the productivity of the future exporters and that of the always exporters. This is suggestive of a process of learning by exporting rather than self-selection of the most productive into exporting status. Indeed, the productivity gap between firms that are not exporting but will export in the following year and those that never export is economically small (2 percent, column 4) and statistically insignificant. Instead, the difference between future exporters and always exporters is both economically and statistically significant (22 percent, column 6). The fact that firms’ productivity increases as they move from the ‘future exporters’ class to the ‘always exporters’ class adds a kernel of truth to the assertion that the estimated TFPR in this paper is capturing efficiency rather than mark-ups. With high effective rates of protection in Pakistan (see for example, World Bank, 2020), increasing export orientation is likely to increase the extent of competition the firm faces.

Table 6 – Average productivity by export status

|Y|Did not export|Export in the following|Export over the|Gap|Gap|Gap|
|---|---|---|---|---|---|---|
|ear|over entire period|year|entire period|(2) – (1)|(3) – (1)|(3) – (2)|
||(1)|(2)|(3)|(4)|(5)|(6)|
|2012|2.25|2.12|2.50|-0.13|0.25***|0.38***|

18 The share of exporting firms in the universe of firms above five employees is estimated at 14 percent, according to the latest World Bank Enterprise Survey for Pakistan. In 2017, the last year of our sample, there were a total of 14,000 exporting firms according to records from the Federal Board of Revenues.

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