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World Applied Sciences Journal 19 (4): 566-574, 2012 ISSN 1818-4952; © IDOSI Publications, 2012 DOI: 10.5829/idosi.wasj.2012.19.04.1645 Impact of Sector-Specific FDI on Sector-Specific Labour Productivity in Pakistan 1Haider Mahmood and A.R. Chaudhary 1GC University, Lahore, Pakistan 2NCBAE, Gulberg III, Lahore, Pakistan Abstract: This study aims at finding the impact of sector-specific FDI on sector-specific labor productivity in Pakistan. The study uses the data of the primary, secondary and tertiary sectors and data is taken from 1972 to 2010 for analysis. The study uses ADF, PP and Zivot-Andrews unit root tests to check the unit root problem in time series and ARDL cointegration bound testing technique to find the long-run and short-run relationships for each sector separately. The results show that the long-run relationships exist in the labour productivity model of all sectors. The short-run relationship exists in case of the secondary sector labour productivity model. The short-run relationships do not exist in case of primary and tertiary sector labor productivity models. Sector- specific FDI has a positive and significant impact on labor productivity in case of all sectors. So, the study finds that FDI is helpful in raising labor productivity in all sectors in Pakistan. Key words: FDI Labour Productivity Cointegration Stationarity INTRODUCTION Literature Review: MacDougall [3] found that FDI had positive spillovers on the host countries through Impact of Foreign Direct Investment (FDI) on host technology and production