This study examines the impact of corporate tax, a fiscal measure along with trade liberalization and research and development on total factor productivity for a panel of 153 industrial firms listed on the Pakistan Stock Exchange over the period 1997-2017. For empirical analysis, we employ the system generalized method of moment estimator. In the first step, we estimate industrial production function and the results reveal that raw material, industrial labour force and energy play vital role in enhancing industrial production. Whereas, industrial capital exerts negative impact on industrial output. We also measured total factor productivity using the production elasticities. In the second step, we examine the impact of corporate tax, trade liberalization and research and development on total factor productivity. The results indicate that higher level of corporate tax exerts negative impact on total factor productivity. The findings reveal that higher corporate taxation discourages industrial firms to undertake research and development thereby exerting adverse impact on total factor productivity of firms. The impact of trade liberalization proxied by average tariff is positive while customs duty and sales tax negatively impact firm-level total factor productivity. These findings provide useful insights for managers, investors and policy makers in Pakistan.

This study examines the nonlinear relationship between financial development and economic growth in Pakistan using the threshold regression model for the period 1980-2017. We also employed quantile regression with 0.25, 0.50, and 0.75 quantiles of conditional distribution. The quantile regression is based on minimizing of sum of squared residuals. The result indicates that economic growth responds positively to financial development when the level of financial development surpasses the threshold value of 0.151. However, when financial development lies below the threshold value (that is, 0.151), its impact on economic growth is negative. Thus, when financial development of Pakistan surpasses the threshold level, it contributes more towards economic growth since greater level of financial development contributes more to boosts economic growth. This finding reveals that economic growth reacts differently to financial development, and the relationship between financial development and economic growth is U-shaped in Pakistan. Among the other variables, physical capital, labor force, and government expenditure exert a positive effect on economic growth. Furthermore, inflation rate and trade openness have an insignificant impact on economic growth. The results of quantile regression also confirm the non-linear relationship between financial development and economic growth in Pakistan. The finding of this study suggests revamping of financial sector policies in Pakistan.