Modeling determinants of competitiveness: a case of textile sector of Pakistan

Abstract

This study explores the economic determinants of the international competitiveness of Pakistan in selected 14 industries of the textile sector from HS-52 to HS-65 by constructing three-panel models with disaggregated competitiveness as a dependent variable from 2003 to 2019. These eclectic models incorporate both domestic and international determinants along with the sensitivity analysis of established relationships. The results have revealed that the growth rate of the world’s per capita income, domestic income, domestic expenditure on research and development, financial development, and domestic infrastructure development has a significant positive effect. While increasing oil prices and deprecation of exchange rate deteriorates export competitiveness of Pakistan in selected textile industries. This study urges Pakistan for the stabilization of exchange rate deprecation along with the increasing oil prices to enhance the competitive cost advantage of domestic industries. The government should expand its support to research and development activities along with the expansion of expenditure on infrastructure development.

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