The Pakistan Development Review
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Pakistan’s Bilateral Trade under MFN and SAFTA: Do Institutional and Non-Institutional Arrangements Matter?
Full text linkThe purpose of this study is two fold. First, to estimate the
impact of institutional and non-institutional arrangements on bilateral
trade, and second to analyse the impact of SAFTA on bilateral trade in
the short as well as in the long run. The empirical analysis which is
based on the panel of eight South Asian countries, comprising data over
the period i.e. 1975–2013 is conducted using fixed effects model along
with Pooled Mean-Group (PMG) estimator for estimating the short and
long-run relationships. The analysis has shown that trade agreements
including South Asian Free Trade Area (SAFTA) and the Most Favoured
Nation (MFN) are not effective in promoting trade, due to low
institutional quality and stringent non-institutional arrangements,
including high tariff along with low physical infrastructure. Further
empirical analysis has shown that both SAFTA and MFN can only contribute
to bilateral trade significantly, if complemented by institutional
framework. As a policy lesson, to improve the trade ties between India
and Pakistan, improvement in physical as well as soft infrastructure is
required. Any trade agreements between the two, including MFN can only
be effective, when it is supported by a well-defined and enforced
institutional framework that ensure the implementation of policy reforms
needed to reduce tariff rate and remove non-tariff barriers
Financial Regulations, Profit Efficiency, and Financial Soundness: Empirical Evidence from Commercial Banks of Pakistan
Full text linkThe purpose of this paper is threefold. First, it measures
profit efficiency and financial stability of commercial banks of
Pakistan. Second, it empirically estimates the effect of the already
implemented financial regulations on the profit efficiency and financial
stability of banks. Third, it examines the differential effect of
financial regulations on profitability and financial soundness across
bank size. To carry out the empirical analysis, a balanced bank-level
panel data covering the period 2008-2014 is used. To gauge the profit
efficiency of commercial banks, Data Envelopment Analysis (DEA) is
utilised, while, to proxy the financial soundness, the Z-score is
calculated for each bank. The panel regression approach is used to
examine the effects of financial regulations on the profit efficiency
and financial soundness of banks. We find that the financial regulations
enforced by State Bank of Pakistan (SBP) have significant impacts on the
profit efficiency and financial stability of banks. The results indicate
that the non-performance loans to assets ratio (NPLL) and the reserve
ratio (RR) impact positively, whereas, the liquidity ratio (LIQR) and
the loans to deposits ratio (LODEPOSIT), significantly and negatively
affect the profit efficiency of banks. However, only LR and RR are
positively and significant related to the financial stability. The
results also suggest that the financial regulations have significant
differential effects on the profit efficiency and financial soundness of
banks across bank size. JEL Classification: C23, E44, G21, G28 Keywords:
Profit Efficiency, Financial Soundness, Financial Regulations, Data
Envelopment Analysis, Z-Score, Differential Effect
Karl August Wittfogel. Oriental Despotism: A Comparative Study of Total Power. New Haven, USA: Yale University Press. 1957 (Reprinted 1981). 550 pages. USD 119 (Paperback).
Full text linkKarl A. Wittfogel, famously known for his hydraulic thesis,
was a German historian and sinologist. In his book, Oriental Despotism:
A Comparative Study of Total Power, he has given a comprehensible
account of social, political, and economic history of Asian societies.
The book offers a study of the development of totalitarian rule in
hydraulic societies. He refers to the Asian societies as hydraulic
societies, as they control the population by maintaining control over
supply of water and irrigation system. The book focuses on different
factors that invited totalitarian rule in these societies. Influenced by
the classical economists, Wittfogel argues that large irrigation systems
tend to win large lands and an expansion and acquirement of large areas
is the development of managerial form of administration
The Employment Effect of Innovation: Evidence from Bangladesh and Pakistan
Full text linkThe analysis of the impact of innovation on employment growth
is an important topic for policy-makers. Unemployment is an important
social topic, and the effects of innovation on employment are often
poorly understood. Despite the significance of this relationship, very
few studies on this topic are yet available for developing countries
compared with the developed ones. This paper contributes to this scant
literature by investigating the employment effects of innovation for two
South Asian developing countries: Bangladesh and Pakistan. We further
analyse whether this relationship shows country-specific and
industry-specific differences. Our analysis shows that both product and
process innovation spur employment in this region as a whole, in both
low-tech and high-tech industries, even after controlling for a number
of firm-specific characteristics. Moreover, although both innovation
types also have significant, positive impacts on employment growth of
all Bangladeshi and of all Pakistani firms separately, they are
important factors for employment growth of only high-tech Bangladeshi
firms and of only low-tech Pakistani firms. Contrary to most previous
studies, we witness an insignificant effect of growth of labour cost on
employment growth, perhaps due to the availability of cheaper labour
force compared with the developed countries. We notice that some of the
innovation determinants exert different influences across industries and
across both countries. The same holds true for the determinants of
employment growth. JEL Classification: J23, O31, O33 Keywords:
Bangladesh, Employment Growth, Pakistan, Product Innovation, Process
Innovatio
The Utilisation of Education and Skills: Non-Pecuniary Consequences Among Graduates
Full text linkIn this study, an attempt has been made to estimate the
incidences of the job mismatch and its determinants in Pakistan. This
study has divided the job mismatch into three categories:
qualification-job mismatch, skill mismatch and field of study mismatch.
The primary dataset has been used in which employed graduates of the
formal sector have been targeted. The paper has also measured the
qualification-job mismatch by three approaches, and found that about
one-third of the graduates have been facing qualification-job mismatch.
Similarly, more than one-fourth of the graduates are mismatched in
skills, about half of them are over-skilled and the rest are
under-skilled. The analysis also shows that 11.3 percent of the
graduates have irrelevant, and 13.8 percent have slightly relevant jobs
to their field of study. The analysis reveals that over-qualified and
over-skilled graduates are less satisfied, while under-qualified and
under-skilled graduates are more satisfied with their current jobs. A
similar situation has been observed in case of the field of study
mismatch, where both the moderate and complete fields of study matched
graduates are more satisfied than the mismatched ones. The job search
behaviour is positively associated with the level of education.
Over-qualification has a positive impact, while under-qualification has
a negative effect to search for another job. A good match between field
of study and current job reduces the likelihood of intention to quit the
job. JEL Classification: I23, I24, J21, J24 Keywords: Education and
Inequality, Higher Education, Human Capital, Labour Marke
Pakistan: State Autonomy, Extraction, and Elite Capture—A Theoretical Configuration
Full text link―When groups are adequately stated, everything is stated!‖1
Management of actions and interest groups has historically been
sovereign‘s existentialist imperative. The paper revitalizes
philosophical state autonomy debate and then narrows down its focus to
capture extractive antics of as erratic a state as Pakistan. A typology
of factions – captioned as Elites – operative in extractive realm of
Pakistan is developed to round them in theory, identify their
properties, and lay bare mechanics of intra-elite and elite-non-elite
transactions. The paper seminally develops the rational actor dilemma
confronting Pakistani elites and identifies the modes through which the
dilemma plausibly resolves itself. The transactional engagement between
Pakistan‘s internal and external rational actors is dissected to
theorize that Pakistan essentially is an equilibrium consensus
subsistence state thereby opening up vast vistas for future research.
The paper concludes with the glum finding that Pakistan in its current
essence and manifestation is fundamentally a captive state – beholden to
elites of Pakistan. JEL Classification: H1 Keywords: State Autonomy;
Elite Capture; Pakistan‘s Tax System; Pakistani Elites; Elites‘ Rational
Actor Dilemma; Equilibrium Consensus Subsistence State; Captive
Stat
Trade Liberalisation and Industrial Productivity: Evidence from Manufacturing Industries in Pakistan
Full text linkThis study examines the impact of trade liberalisation on the
industrial productivity for a panel of twenty seven 3-digit
manufacturing industries in Pakistan over the period 1980-2006. Using a
variant of the Cobb-Douglas production function for industrial sector,
we estimated output elasticities. The results show positive output
elasticities with respect to labour, capital and raw materials for the
pre-trade liberalisation period (1981 –1995) as well as post-trade
liberalisation period (1996-2006). For the pre-liberalisation period, we
observe positive output elasticity with respect to energy, while it
turns out to be negative in the post-liberalisation period probably due
to energy crisis in Pakistan. In the second stage, we calculate total
factor productivity (TFP) and examine the impact of trade liberalisation
on TFP for pre-and post-trade liberalisation periods. The results reveal
that trade liberalisation proxied by import duty has positive but
negligible impact on the TFP in the pre-as well as post-liberalisation
periods. On the other hand, effective rates of protection exert large
negative impact on the TFP in the post-liberalisation than the
pre-liberalisation period. JEL Classifications: F14, F13, O53, L60
Keywords: Trade Liberalisation, Total Factor Productivity, Manufacturing
Sector of Pakista
Nadeem Ul Haque. Looking Back: How Pakistan Became an Asian Tiger by 2050. Karachi, Pakistan: Kitab (Pvt.) Limited. 2017. 193 pages. Amazon Kindle edition.
Full text link“Looking Back: How Pakistan Became an Asian Tiger by 2050” is
Nadeem Ul Haque’s latest book. The Kindle edition of the book is
available from Amazon. The book, while dismissing the notion of
‘development first’, argues for ‘reforming the system first’ to make the
ground conducive for sustainable development. The book, written as
semifiction, imagines Pakistan as a developed country by year 2050. The
United Nations, which sets up a commission in the year 2051 to
understand Pakistan’s development model, narrates the development
stor
Institutions and Innovation: Evidence from Countries at Different Stages of Development
Full text linkThis paper empirically analyses the impact of institutions,
both formal and informal, on innovation performance of sampled countries
at different stages of development. Data of 72 sampled countries on
Research and Development Expenditures, numbers of article published,
human capital, trade openness, internet users are collected from United
Nations Educational, Scientific and Cultural Organisation (UNESCO),
International Country Risk Guide (ICRG) and World Bank database. Formal
and informal institutions indexes are constructed using data from
Country Risk Guide and The World Value Survey (WVS). Fixed effect and
System GMM technique are used to estimate the dynamic relationship
between innovation performance and institutional indexes. The study
finds positive significant effect of institutions on innovation in case
of aggregate sample of developed and developing countries. However, the
effects of formal institutions are more significant in case of sample of
developed countries, while in developing countries informal institutions
are found more effective than formal institutions in affecting
innovation performance. The results also show that both formal and
informal institutions are supplementary to each other in case of
developing countries. Therefore, it is suggested that focus should be
given to informal institutions. Moreover, collective initiatives be
encourage in developing countries to have diverse ideas from different
sectors of the countries. In addition, developing countries should
initiate collaborative research projects with technologically advanced
countries research and education institutions so as to learn from each
other’s ideas and experiences. Keywords: Formal Institutions, Informal
Institutions, Innovatio