The Pakistan Development Review
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The Effects of Fiscal Policy on Economic Growth: Empirical Evidences Based on Time Series Data from Pakistan
Get PDFFiscal policy refers to government‟s efforts to influence the
direction of the economy through changes in taxes or expenditures.
Optimal fiscal policy in Pakistan and in other developing countries
plays a pivotal role in growth process and, hence, serves as a vital
instrument for economic growth. The efficacy of fiscal policy in
improving economic conditions in the long run is, however, a
controversial issue and needs further investigation. In conventional
model, a federal tax cut without a corresponding reduction in federal
expenditures will encourage consumption expenditures and interest
earnings due to increase in personal disposable income. Contrarily,
according to Ricardian Equivalence Theorem (RET), the same change in
fiscal policy will not result in any of the above mentioned
macroeconomic impacts. In other words, a reduction in deficit-financed
federal tax cut will not affect macroeconomic outcomes [Saxton
(1999)]
Fiscal Equalisation Among Provinces in the NFC Awards
Get PDFFiscal equalisation refers to attempts within a federal system
of government to reduce fiscal disparities among jurisdictions, which
emerge due to variation in sub-national jurisdictions ability to raise
revenues to meet the public expenditure needs of their residents. This
is because of an imbalance in the assignment of revenue sources to
sub-national levels and their expenditure needs, given the allocation of
the inter-governmental fiscal powers and responsibilities. In the
Pakistani context, the need for transfers is highlighted by the fact
that while provincial governments generate only about 8 percent of total
national resources, their share in total public spending is 28 percent.
Also the fiscal capacity of the four provinces varies, with the
relatively more developed provinces being able to self-generate a higher
proportion of their resource requirements. As such, transfers take
place, according to the provisions of the National Finance Commission
(NFC) awards, with the objective of removing both vertical and
horizontal imbalances between own-revenues and expenditure
Fiscal Decentralisation in Pakistan
Get PDFFiscal decentralisation is considered as an important policy
instrument to achieve economic efficiency and ensure effective
governance through financial autonomy of provincial governments. It
integrates the smaller units of federation and ensures their
participation in the economic development of country while at the same
time capacitate the central government to fulfil the national level
tasks more efficiently and effectively. It is considered as an important
growth accelerating measure. It empowers the lower level governments
through financial autonomy and administrative empowerment. Devolution
helps the lower tiers of government to act as a powerful administrative
agent of the central government. However, decentralisation helps units
to be more innovative, responsible and efficient as they have more
autonomous status. Decentralisation policy is believed to positively
affect economic growth because it envisage better derivation and
implementation of social policies. The decentralised setup of the
government does not have any information barriers and lower level of
government is better positioned to know the basic necessities and
developmental needs of the people that are living in different regions
of a country. Decentralisation brings up the true potential of a
locality with the efficient resource exploration and its efficient
utilisation. It furthers competition among the competing constituencies
for better service provision which results in higher efficiency. This
all has the potential to positively influence economic
growth
Impact of Fiscal Decentralisation on Human Development: A Case Study of Pakistan
Get PDFFiscal decentralisation refers to the transfer of authority
and responsibility from central government to sub-national or the local
government. It is mostly pre-assumed that fiscal decentralisation can
play important role in the efficient allocations of resources and
improvement of the political, economic and social activities. Many
studies unlock the relationship between federal government and
sub-national governments or local government. Fiscal decentralisation
theories mostly based on Richard Musgrave’s (1939) functions of
government. He defined three roles: stabilisation, allocation and
distribution whereas, only the allocation function seems to be
appropriate to fiscal decentralisation theory. Because these three
functions are not equally suitable for all level of governments and it
is necessary for efficiency that each function is properly matched to
the level. It is a step forward towards more responsive and efficient
governance if the decentralisation is done properly [Oates (1972)]. The
logic behind fiscal decentralisation is accountability and efficiency;
the smaller organisations are more fragile for accountability than the
larger ones. However, decentralisation has not always been effective in
the provision of service delivery and hardly accountable due to lack of
community participation. If there is no spill over effects and in the
absence of diseconomies of scale it could be effective and efficient.
The sub-national governments where the externalities are internalised
and scale economies are acceptable fiscal responsibilities should be
assigned [Rodden, et al. (2003)]. The sub-national governments are much
closer to the people and they are better informed to respond according
to their demands of goods and services [Hayek (1945); Qian and Weingast
(1997)]. Service deliveries are highly dependent on transfers from
central governments. It is necessary to increase the revenue autonomy of
sub-national governments and it is linked with the service delivery in
social sector [Elhiraika (2007)]. Lower level of governments is closer
to the people and much aware of the preferences of localities. Service
deliveries should be located at the lowest level because decentralised
provision of services increases the economic welfare [Oates
(1999)]
Using the Health Belief Model to Understand Pesticide Use Decisions
Get PDFFarmers use pesticide to protect their crops from pests which
in-turn help them maximise agricultural output on limited acres of land.
However, the extensive use of such pesticide results in substantial
health and environmental threats. According to WHO (1990) pesticide use
causes 3.5 to 5 million acute poisonings a year. Rough estimates show
that 20,000 workers dying from exposure every year and most of them from
developing countries. The literature shows that health and environmental
hazards of pesticide use occur due to lack of information, awareness and
knowledge which are chief contributing factors of extensive overuse or
misuse of hazardous pesticide and dangerous practices [Forget (1991);
Dasgupta, et al. (2005a); Ibitayo (2006)]. Research has also shown that
health and environmental hazards of pesticides can be avoided by
awareness, education and changing farmer’s attitude and behaviour
regarding pesticide use [Dasgupta, et al. (2005a)]. Therefore, the first
step in developing pesticide’s health and environmental hazard reduction
policy is to set up the extent of the problem by investigating farmer’s
attitudes and behaviours regarding pesticide use [Koh and Jeyaratnam
(1996); Dasgupta (2005a, 2005b)]. Such information is critical to
identify the ‘prospects and constraints to the adoption of alternative
crop protection policy’ [Ajayi (2000)]
Government Expenditure and Tax Revenue, Causality and Cointegration: The Experience of Pakistan (1972-2007).
Get PDFThis paper establishes empirically the causal relationship and
long run relationship between government expenditures and government
revenues for the case of Pakistan from 1972 to 2007. Fiscal policy, a
short run issue, but that can have testing macro economic consequences.
Fiscal policy is viewed as an instrument to mitigate short run
fluctuations. In this paper we examine tax/spend or spend/tax
hypothesis. For this purpose, bi-directional Granger causality will be
applied for instance flow from government expenditure to revenue or
revenue to government expenditure. This issue has been concerned with
intretemporal relationship between revenue and expenditure, so to check
long run relationship Engel Granger cointegration will be used. For
checking data stationary, non stationary unit root, and ADF/DF
approaches give the proof for this hypothesis. The results show the
presence of co-integration between government expenditure and tax
revenue variables implying evidence of a stable long-run relationship
between them. The Granger Causality test suggest the unidirectional
causality flow from government expenditure to tax revenue. Keywords:
Government Expenditures, Government Revenues, Granger Causality,
Stationary, Co-integratio
Pakistan’s Higher Education System—What went Wrong and How to Fix it.
Get PDFNone of Pakistan’s 50+ public universities comes even close to
being a university in the real sense of the word. Compared to
universities in India and Iran, the quality of both teaching and
research is far poorer. Most university “teaching” amounts to a mere
dictation of notes which the teacher had copied down when he was a
student in the same department, examinations are tests of memory,
student indiscipline is rampant, and a large number of teachers commit
academic fraud without ever getting punished. In some universities the
actual number of teaching days in a year adds up to less than half the
officially required number. Some campuses are run by gangs of hoodlums
and harbour known criminals, while others have had Rangers with machine
guns on continuous patrol for years on end. Common wisdom has always
been that increased funding can solve all, or at least most, of the
systemic problems that bedevil higher education in Pakistan. But
Pakistan offers an instructive counterexample: a many-fold increase in
university funding from 2002-2008 resulted in, at best, only marginal
improvements in a few parts of the higher education sector. This
violation of “commonsense” points to the need for some fresh thinking.
The analysis of Pakistan’s higher education system divides naturally
into three parts: consideration of the necessary background;
understanding the meaning of university quality in the Pakistani
context; and exploring the space of solutions
Nominal Frictions and Optimal Monetary Policy
Get PDFIt is well known in standard economic literature that nominal
frictions have significant impact on the transmission mechanism of
monetary policy. This paper considers a closed economy version of DSGE
model with various nominal frictions vis-à-vis monetary-cumfiscal blocks
to seek the basic query that how monetary policy impacts while in the
presence of nominal frictions, like price stickiness, staggered wages,
etc. Using Bayesian Simulation techniques, we estimate the model for the
closed economy. Our simulation results show that despite the apparent
similarities of various frictions, their responses to shocks and fit to
data are quite different and there is no agreement on their relative
performance. As a result, Monetary Authorities cannot afford to rely on
a single reference model which contains few nominal frictions of the
economy but need to model a large number of alternative ways available
when they take their decision of optimal monetary policy. JEL
classification: E32, E37 Keywords: DSGE Models, Nominal Trictions,
Monetary Polic
Inter-Governmental Funds Flows in Pakistan: Are they Reducing Poverty?
Get PDFThe purpose of this paper is to see whether any link can be
found between the inter-governmental fiscal transfers and the
deprivation index in the districts of Pakistan. The data for the study
was collected from 98 districts of four provinces of Pakistan for the
year 2003 and 2007. The results of the study shows the transfers have
reduced deprivation across the board but unable to solve disparity
issue. In fact the results show the extreme inequality (ratio of maximum
to minimum) has increased over time but average disparity (coefficient
of variation) gives mixed results. Keywords: Fiscal Federalism,
Horizontal Inequity, Vertical Inequity, Intergovernmental Fiscal
Transfer
Empirical Investigation of Debt-Maturity Structure: Evidence from Pakistan
Get PDFWe examine the empirical determinants of debt-maturity
structure of 266 firms listed on the KSE over the period 2000 to 2004
using several variants of dynamic panel data models. We find mixed
support for the agency cost hypothesis as our results show that
debtmaturity increases with the size of the firm; however, growth
options do not have any significant influence on debt-maturity
structure. Our results lend unambiguous support to the maturity-matching
hypothesis as debt-maturity varies inversely with operating activities
and directly with the maturity of long-lived assets. Finally, we find
evidence that supports the taxbased hypothesis but no evidence to
support the signaling hypothesis. Moreover, the results demonstrate that
there is a significant dynamic component in the determination of optimal
debt-maturity structure of the sampled firms. JEL classification: G32
Keywords: Debt Maturity, Capital Structure, Panel Data, GMM,
Pakistan