23rd AGM Papers Abstracts
Financial Reforms and Economic Growth: Comparison of China and Pakistan
by Abdul Jalil
In this paper, the finance-fluctuation nexus hypothesis is tested for China and Pakistan over the period of 1960-2005. It is concluded that greater financial development increases access to credit markets, which leads to greater consumption and investment smoothing. This in turn reduces the volatility of real growth. The ARDL approach to cointegration is conducted to establish the existence of a long run relationship between financial developments and macroeconomic fluctuations. The study uses deposit liability to nominal GDP ratio (DLR) and credit to private sector to nominal GDP ratio (CPS) as proxies of financial development. Furthermore, this research makes suggestive policy implications for the further development of the financial sectors of both countries in order to get stable economies and sustainable growth.
Willingness to pay for quality of drinking water
by Abdul Sattar and Eatzaz Ahmed
This paper presents households behavior of willingness to pay for quality of drinking water of Hyderabad city. The multinomial logit model is estimated for averting behavior to water contamination. Measures of awareness and households’ wealth are incorporated into the model to account for joint production of utility. The study finds out that measures of awareness such as different levels of formal education of decision-makers and their informal exposure to mass media have statistically significant effects on willingness to pay for the averting behavior like home purification methods for drinking water. Furthermore, it also finds out willingness to pay for better quality of drinking water is much higher than the richest household of the sample, if the decision-maker having the highest level of education.
Milk Districts and Efficiency of Smallholder Dairy Producers in Pakistan
by Abid A. Burki and Mushtaq A. Khan
Milk districts are private rural milk supply chain networks that might provide innovative way to address issues of rural development and poverty. Little is known how the milk districts benefit the participating dairy producers. Do they produce favorable production conditions and incentives to the participating farms? How these production conditions affect relative inefficiency of the farms? Do the number of industry players collecting farmer milk in a village matter in determining farm inefficiency of dairy farms? We estimate the stochastic production frontier and technical inefficiency effects model by employing data of a cross-section survey of dairy households from rural Punjab in Pakistan for the calendar year 2005. While we find that relative technical inefficiency of farms in milk districts is significantly reduced, we detect stronger power of the milk districts in further reducing technical inefficiency if they are located in remote areas, or they are bigger farms. An efficient private milk market develops as the number of economic agents competing for the rural milk supplies increases. The advantage to experienced farmers in reducing inefficiency is present, which remains until the age of 69-years. The remaining differences in relative inefficiency are accounted for by timely feeding of water to milch animals, severe long-term depressive disorders, and better feeding regimes.
Decube Framework: An Introduction to a new Energy Modeling and Planning Process for Sustainable Utilization of Pakistan's Energy Resources
by Adeel Ghayur
Sustainable utilization of energy resources is a profound challenge confronting decision and policy makers in the twenty-first century. Policy development does not relate to the provision of affordable energy alone; equally important and challenging is the need to address the issue of Climate Change. Meeting this twin challenge timely and effectively is crucial for keeping a country on track of sustainable development and progress. To undertake such a huge task the policy and decision makers have started utilizing different tools and methods during energy policy making process. Termed under, Energy Models these are usually mathematical models used for scenario development and energy forecasting. However, the energy modeling and planning process also encompasses other aspects such as energy resource planning and policy planning. In this paper, we propose a new energy modeling process, namely: Decube Framework. This framework encompasses entire process from initial energy scenario modeling till the development of an energy action plan. The other attraction of the framework lies in the fact that it is being specifically designed for a developing country like that of Pakistan.
How Pakistan is Coping with the Challenge of High Oil Prices
by Afia Malik
Global oil prices have shown an almost steady rise since 2003, with the April 2006 price double than that was in January 2004 (Bacon 2005). Demand, supply and speculative factors, and their interrelationships all leads to the steady rise in oil prices. In the last couple of years, global demand for oil grew due to economic strengthening in the US, as well as strong economic performance in developing Asia, (especially PR China and India). From 1990 to 2003 world demand for oil grew at the rate of 1.3 percent while for the People Republic of China and India (combined) at 7 percent rate and accounted for almost 40 percent of the demand growth1 (ADB 2005).
Another factor contributing to stronger demand is the low level of stocks in industrial countries and their rebuilding in a period of supply uncertainty. Also some of the countries in Asia have started building their own reserves. Third factor contributing to high oil prices is the high risk premium on oil and is continuing, as supply by some main producers is regarded as unstable2. Fourth, geopolitical uncertainties and tight market conditions have encouraged speculative funds to enter the market and further push up prices in the short term (ADB 2004). This trend in rising prices has become a grave concern for the developing economy like Pakistan. Because if this trend continued can result in inflationary pressures in the economy, increasing budget deficit and balance of payment problems and slowdown in the economic growth
New Keynesian Phillips Curve for Pakistan
by Ahsan ul Haq Satti, Wasim Shahid MaliK and Ghulam Saghir*
Following Gali and Gertler (1999) we have estimated New Keynesian Phillips Curve (NKPC) for Pakistan over the period 1976 – 2006. Using GMM we find that forward – looking component in inflation determination is significant. It has also been found that real marginal cost and not the output gap is driving force of inflation. Results of Hybrid NKPC show that the inflation does not posses backward inertia rather it is dominated by forward – looking behavior. We have also found, with the help of estimating structural NKPC, that the degree of price stickiness in Pakistan is very high while the fraction of firms using backward – looking rule in price setting is quite low.
The Impact of Trade Openness and Corruption on Environmental Quality (Case Study of Selected South Asian Countries)
by Amanat Ali, Faiz-Ur-Rehman and Mohammad Nasir
The invention of globalization has increased the importance of trade manifold. It also provides momentum to the idea of sustainable development. But these developments also depend on the quality of institutions in the economy. This paper discusses the idea of environmental sustainability to demonstrate the impact of trade, corruption, and income level on environmental policy formation. Trade affects the environmental quality positively but this relationship can be distorted by the level of corruption in the economy. Demand for environmental quality increases as the output level starts rising, but it is also off-setted by the corruption level. Therefore, policy makers must consider the importance of institutions in the economy before formulating a welfare directed policy in such a dynamic and complicated system.
Ecofeminism and Movements From North to South
by Aneel Salman
This paper looks briefly at the concept of Ecofeminism and its movement (section 1 and 2). Section 3 succinctly deals with the
commonalities between ecology and feminism. Section 4 discusses the role of women and their interconnectedness to the environment, while the subsequent section looks at the struggles of women to conserve their habitats. Case studies in this section focus on three South Asian countries (India, Bangladesh and Pakistan), as well as one case study from the United States and one from Kenya. With the help of these cases, I have tried to see if and how Ecofeminism has evolved in these countries.
External financial Resource Management by Listed Pakistani Firms
by Attiya Y. Javid and Robina Iqbal
Water Resources and conservation Strategy of Pakistan
by Ayaz Ahmed, Henna Iftikhar and G.M. Chaudhry
Water is an essential element for survival of living things. It is vital factor for economic development for augmenting growth of agriculture and industry. The paper analyzes the water resources and conservation strategy of Pakistan. Since independence our country constructed only two big dams i.e. Tarbela and Mangla. The sedimentation condition in these dams is also declining the storage capacity. The study indicates that due to stagnant water resources the per capita water availability is decreasing at an alarming rate. The study highlights the proposed and ongoing water projects. Finally the paper also articulates the water conservation strategy for Pakistan in order to fulfill the future requirements.
Forecasting Wheat Production of Pakistan
by Falak Sher and Eatzaz Ahmad
This study analyzes future prospects of wheat production in Pakistan. For forecasting purpose we need future values of inputs used in wheat production and the parameters that link inputs to wheat output. The parameters are obtained by estimating Cobb-Douglas production function for wheat for each province of Pakistan. The future values of various inputs are obtained by estimating a separate ARIMA model for each input for each province and then making dynamic forecasts for the required forecasting period using the time series data from 1979-2006. Input forecasts and parameters of wheat production function are then used to generate wheat forecasts. Forecasting performance of the model is evaluated by finding wheat forecast errors and percent errors for 2005-06 by conducting the entire analysis and making forecasts for 2005-06, using the data from 1979-2004. The results of the study show that first, second, third, and fourth important inputs in ranking in wheat production per hectare are lag output per hectare, labor force per hectare, number of tractors per hectare, and sum of the rainfall in the months of November to March, respectively in all the four provinces. The results also show that the coefficients of labor force per hectare, tractors per hectare, per hectare fertilizer use, sum of the rainfall in the months of November to March, rainfall in the month of April and sum of the standard deviations of rainfall in the months of November to March are common for all the four provinces implying that all these variables have the same role in wheat production in all the four provinces. Forecasting performance of the model based on out-of-sample forecasts for 2005-06 period is highly satisfactory with 1.81 % mean absolute error. The future forecasts for the period of 2007-15 show steady growth of 1.6 %.
Measuring Technical Efficiency of Onion, Tomato and Chilies Production in Sindh, Pakistan
by Fateh M. Mari and Heman D. Lohano
This paper estimates technical efficiency in production of onion, tomato and chilies, and analyzes the returns to scale in production function of these crops using primary data collected from three districts of Sindh, namely Hyderabad, Thatta and Mirpurkhas. Functional form of the production function was specified as Cobb-Douglas function with three inputs: land, labor and capital. Ordinary least square method was used for estimating the production function. Sum of the coefficients on these inputs measures the degree of homogeneity, which determines whether the production function is constant
increasing or decreasing returns to scale. The t-test was applied for testing the null hypothesis that degree of homogeneity equals 1. Null hypothesis was maintained at 5% significance level for each of onion, tomato and chilies crops. These results indicated that the production function has constant returns to scale for these crops. The technical efficiency rating indicates that onion, tomato and chilies producers are not technically efficient in producing the selected crops. The average technical efficiency rating is 0.59, 0.74 and 0.83 for onion, tomato and chilies respectively.
Natural Resource Endowment and Recent Economic Performance
by George Mavrotas, S. Mansoob Murshed and Sebastian Torres
We examine the relationship between natural resource endowment type and economic growth in developing countries. Certain types of natural resources such as oil and minerals tend to exhibit concentrated production and revenue patterns,
while revenue flows from other resources such as agriculture are more diffused. Most developing countries that export products from the first group are prone to growth failure in recent times. An explicit model of growth collapse with microfoundations in rent-seeking contests that have increasing returns in rent seeking outlays is presented. This is the first innovation of the paper. Secondly, the empirical analysis presented is one of the few econometric investigations into the
resource curse with a time dimension, as it is a panel data estimation. Our findings suggest that a point-source type natural resource endowment does retard institutional development measured by both governance and democracy, which in turn hampers growth prospects. But the resource curse may be more general and not simply confined to mineral and coffee exporting countries. We use a variety of econometric methodologies to establish the robustness of our results, which is
another innovation of our paper.
Determinants of Corruption in Developing Countries
by Ghulam Shabbir and Mumtaz Anwar
Corruption is not a new phenomenon; we are living with it since the birth of government’s institutions. Corruption has two dimensions; public sector corruption and private sector corruption. The public sector corruption means, “misuse of public office for private benefits”. For cross country analysis, public sector corruption is mainly focused. In this study, we have analyzed the 41 developing countries to investigate the determinants of corruption. Corruption determinants are sub-divided into economic determinants and non-economic determinants. The economic determinants include economic freedom, globalization, level of education, distribution of income and average level of income. The non-economic determinants list consists on press freedom, democracy and share of population affiliated with particular religion. The empirical findings of the
study indicates that; all economic determinants are negatively related to the perceived level of corruption except distribution of income and noneconomic determinants are not significantly explaining the variations in the level of corruption. This shows that the socio-political and religious norms are so weak that they can not affect the corruption level in these countries. The contribution of religion in people’s practical life is very little, so the cultural values of developing countries are not religion based. Therefore, perceived level of corruption is not affected by the religion. This study concluded that government should focus the economic factors to curb the level of corruption.
Population, Environment and Poverty in Pakistan: Linkages and Empirical Evidence
by Himayatullah Khan
This study explores the interlinkages among population, environment and poverty and presents empirical evidence in a developing country like Pakistan. It gives alternative views on population- environment linkages. It explains poverty trap, market based harmony, and dual effect of poverty on the basis of a link between population growth and natural resource degradation. In addition, the paper also highlights social and political instability through population-poverty-environment spiral. It also presents empirical evidence on population-environment-poverty nexus in Pakistan. It also compares environmental sustainability index and human development index for selected Asian countries. The paper also gives scores for different components of environmental sustainability index for Pakistan and compares these with India. The paper concludes that the causal relationship between poverty and environment works in both directions, often through changes in GDP and population. Population stress does not have any significant direct effect on all aspects of environmental status in Pakistan.
Climate Change and Economic Development: A Pragmatic Approach
by John Gowdy and Aneel Salman
Two major problems promise to dominate economic policy during the twenty-first century. These are global climate change and the growing gap between rich and poor. Economists must face these issues at a time when the standard tool of economic analysis—computable general equilibrium and the theoretical system that supports it— has fallen into disfavor. This is both a challenge and an opportunity for development economics. This paper first examines the inadequacies of the standard model to deal with human development and climate change, drawing where possible on the situation in Pakistan. We then outline an approach to coping with climate change based on new perspectives in development economics and on the likely consequences of global warming for Pakistan.
Energy Use for Economic Growth: Cointegration and Causality Analysis from the Agricultural Sector of Pakistan
by Khalid Mushtaq, Faisal Abbas and Abedullah
Economic growth is energy-intensive. Nonetheless, in developing countries like Pakistan, the present use of energy use in agriculture is not strictly commensurate with energy consumption trends. Sharp increases in energy prices in Pakistan have renewed interests in the effects of energy on economic growth. Using time series data from 1972 to 2005, this study shows that in the non trended model the null of unit root for all variables is accepted while in the trended model, except for GDP, the null of unit root is accepted for the remaining variables. Thus all variables are non stationary in their level form. The result of the <3>3 test implies that all variables have unit root with no trend, excluding the CPI that is trend stationary. In first difference form the null of unit root is not accepted, meaning that all variables are first difference stationary while the CPI is stationary after taking second difference. The Cointegration analysis found only one cointegrating vector for oil, electricity, and gas hence, there exists a long run equilibrium relationship between these variables and agricultural growth. The causality analysis implies that gas consumption has bidirectional causality, meaning that gas, a natural resource, has important implications for agricultural growth in Pakistan and vice versa. However, there is no causal relationship found, in any direction, for petroleum and electricity with agricultural growth.
Valuing Interventions to Reduce Indoor Air Pollution by addressing Endogeneity -- Fuelwood Use, Deforestation and Health in Rural Nepal
by Krishna Prasad Pant
Poor people in developing countries use dirty fuels because they find it easier to collect and cheaper to buy than modern fuels. The environmental consequences of the fuelwood harvesting from common property resources are much discussed in the literature. But, limited studies are available on the health costs of the biomass fuel use and indoor air pollution. In addition, the health conditions of the household members may also affect fuel choice in turn creating a condition of endogeneity bias on the estimates. The study attempts to estimate the health effects and resulting costs of indoor air pollution from biomass fuel after adjusting for the problem of endogeneity by employing a survey of 600 rural households that has generated household information about energy use and respiratory health status of 2,739 adults and 301 children. Based on the data, the paper investigates the effects of interventions like biogas and improved cooking stoves on health benefits. The respiratory diseases affected by the intervention are chronic bronchitis and asthma among adults and acute respiratory infections among the children. Instrumental variable probit regression is used for the health effects and cost of illness approach for health costs. The study concludes that if the health costs are counted, the biomass fuels are much expensive than the modern fuels and the traditional chula much expensive that the improved chula. Making the poor to understand the private health costs from biomass fuel can help to protect the public goods by reducing fuelwood harvesting
An Anatomy of State Failures in the Forest Management in Pakistan
by Lubna Hasan
Deforestation remains one of the most intractable environmental problems of today. Pakistan also faces serious problem of depletion of its forest reserves. The general perception among planners is that over population is the primary culprit behind forest degradation. Moreover, people living close to forestlands, and using it for their needs, show an imprudent behaviour towards these forests and use it in an unsustainable manner. So there is tendency among the policy makers to find ways of keeping people away from this resource, and to strengthen government’s hold over it. This is a rather simplistic conception of the issue since most of the forests in Pakistan are state owned/managed, and responsibility for the protection/conservation of these forests rests with the state, therefore, any inquiry into the causes of forest degradation in Pakistan must analyse the state’s role in it. Putting the entire burden of deforestation on ‘other factors’ shifts attention away from more important causes (namely, failure of government to manage forests), and leads to wrong policy conclusions. This study intends to focus
attention on this important factor behind deforestation – the role of state in forest degradation in Pakistan.
Instrument of Managing Exchange Market Pressure: Money Supply or Interest Rate
by M. Idrees Khawaja and Musleh-ud Din
The magnitude of exchange market pressure as well the instruments used to manage it have important ramifications for the economy. Typically, management of exchange market pressure involves the use of instruments such quantitative controls on movement of foreign currency, variation in the level of money supply, or interest rate. Using sum of exchange rate depreciation and foreign reserves outflow as measure of exchange market pressure, the study seeks to investigate whether the authorities in Pakistan use interest rate or domestic credit for managing the level of exchange market pressure. Evidence from Granger causality suggests that during active life of foreign currency deposits (FCDs) interest rate has been used to manage exchange market pressure. However the instrument changed to domestic credit with the freeze on FCDs in May 1998. Use of domestic credit for managing exchange market pressure continued in the post 9/11 era. By and large, evidence shows that money supply is mainly used to manage exchange market pressure.
Household Forest Conservation and Environmental Literacy: Does the Participation in the Microcredit Based Social Forestry Program Matter? Experience from Proshika in Bangladesh
by M. Jahangir Alam Chowdhury
The study intends to assess impact of the participation in the social forestry program of Proshika in Bangladesh on household forest conservation and environmental literacy of participating households. The number of trees planted by a household on its own land in a year has been used as an indicator of the level of household forest conservation of that household. The level of environmental literacy of the same household has been determined through determining the level of knowledge of the household about 16 important environmental issues. The analysis is based on a household-level survey of 420 households. The results indicate that the participation in the SF projects of Proshika significantly enhances the awareness of households about the importance of household forest conservation. And it also enhances the environmental literacy of participating households.
Techno-Economic Evaluation of Chromium Recovery Pilot Plant Installed at Kasur Tanneries Complex, Pakistan
by M. Rafiq Khan
Techno-economic evaluation of the Chromium Recovery Pilot Plant installed by KTWMA at Kasur Tanneries Complex was carried out. The data were collected from KTWMA by paying visits to the Office of the General Manager, Tanneries Water Pretreatment Plant Kasur for general information and having the round of the plant under study to see the work-in- progress. The GM and the Plant Supervisor were comprehensively interviewed to dig out the information. The detailed information was also supplied by the Plant Supervisor by answering a comprehensive questionnaire provided to him for filling the information and answering the questions. The data were, subsequently, analyzed to determine the B/C Ratio, NPV and Payback Period of the Project. The analysis led to the B/C Ratio of 0.5, negative NPV of Rs 14,650,011 and payback period 36.
The indicators are far below the decision criteria. Thus, the installation is not financially and economically viable. The study, of course, recommends that the installation, being a social and legal obligation, is socio-economically justified even if the tanner has to invest the capital required from his own resources.
Consumer Perceptions, Practices, and Willingness to Pay for Safe Drinking Water: A Scenario Analysis of Urban and Rural Abbottabad
by Mirajul Haq, Usman Mustafa, and Iftikhar Ahmad
The study describes the Contingent Valuation Method (CVM) and Averting Behavior Approach (ABA) to analyze drinking water services and quality in district Abbottabad. In an attempt to measure, how much households are willing to pay for improved water services, we use CVM and apply multinomial logistic regression. In ABA, we again have used the same technique to estimate the water purification behavior of households. Education, awareness, available water sources, and quality of drinking water determine WTP of HH in the sample district
Valuation and Pricing of Surface Water Supplied in Pakistan
by Mohammad Asif Khan
The Impact of Globalization on Economic Growth of Pakistan: An Error-Correction Modeling
by Muhammad Afzal
The impact of globalization varies from country to country depending on the level of social, economic and political developments. LDCs have gained as well as suffered from globalization. Globalization is the need of the hour and no country can afford living in isolation. LDCs can counter the adverse impact of globalization if they unite and adopt policies that serve their genuine cause. This paper examined the impact of globalization on the economic growth of Pakistan’s economy for the period 1960-2006. Pakistan’s economy remained heavily regulated and protected during three decades (1950s, 1960s, and 1970s). Pakistan started liberalizing the economy in late 1980s. We used trade openness and financial integration measures to account for the impact of globalization on economic growth. Cointegration results indicate a robust long-run relationship between economic growth, trade openness and financial integration. Pakistan’s economy will certainly benefit from globalization provided the country pursues sound policies.
Dynamic Modeling of Energy and Growth in South Asia
by Muhammad Arshad Khan and Abdul Qayyum
This study empirically examines the link between real GDP, energy consumption, capital and labour for four South Asian countries including Bangladesh, India, Pakistan and Sri Lanka over the period 1972-2005. Applying bound testing approach to cointegration, we find a strong cointegration between real GDP, energy consumption, capital and labour for each country. The study mainly focuses on the role played by energy in enhancing productivity in the South Asian region. Based on unrestricted errorcorrection modeling procedure, the study finds supportive evidence in favour of long-as well as short-run causality running from energy consumption to real GDP for each country. The study suggests that the economies of South Asian region are energy dependent economies. Hence the policies of energy conservation are formulated in such a way that these policies would not any produce adverse effects on economic growth in the region.
Environment Friendly Cotton Production through Implementing Cotton-IPM
by Muhammad Azeem Khan, Iqbal and Iftikhat Ahmad
Impacts on biodiversity and biosafety indicators were estimated in the context of total pesticide use, toxicity class of pesticide use, environmental quotients, health hazards, attitude towards environment and pest-predator dynamics at IPM and farmers plots Information collected through season long Cotton Eco-System Analysis (CESA) was specifically analyzed to determine field biodiversity and environmental gains. Khairpur district of Sindh province was selected for impact analysis on biodiversity assessments. Data used in this analysis includes specific sections covered on knowledge and practices of farmers on plant protection measures and improvement in biodiversity, preservation of soil health and empowerment of farmers in decision-making on plant protection measures. These data were collected during baseline as well as post-FFS-impact surveys conducted during 2001 and 2003 respectively.The observed bio-diversity was examined through measuring farmers’ perceptions on crop-loss assessments. Mean, Standard Deviation and paired T-test statistics was used to highlight the differences in plant protection measures used by sample farmers. Correlation matrix was developed to show association between socio-economic attribute and plant protection measures of the sample farmers. The Environmental Impact Quotient (EIQ) method was used to estimate the total field EIQ of the farmer, ecology and consumer categories. Results show that total doses of pesticide chemicals were largely reduced (43%) on FFS farms. Highly toxic class of pesticide use reduction was much higher (54%) which resulted into lowering the
EIQ more than 100% as compared to a quantum jump at control farms. The change in the FFS farmers’ attitude and beliefs helped them to change pesticide use behaviors for better environment and health improvements. FFS-farmers attendance score and their age and education status are significantly associated with the pesticide applications, observed biodiversity and field EIQ. The ratio of predators and pests indicates that less chemical use gives free hand to predators to flourish, fluctuate and counter the pest pressure, whereas on farmer practice plots, the pesticide aid reduces natural pest control processes; which enhances pesticide use dependencies. The community level initiatives are suggested to be taken to improve sanitation through recycling agricultural waste and its utilization to manage fertility for sustainable production. The community organizations and women schools can play a catalyst role in this important direction. Information generated through CESA on pest and predator dynamics helps farmers to understand pest-predator interaction to allow nature to work with lesser or most appropriate interventions. More involvement of plant protection experts during both FFS-trainings and post-FFS follow-ups is suggested for improved understanding among farmers, extension agents and researchers. The data collection methods, analyses, interpretations and hypothesis building is recommended to be pursued further for developing appropriate innovations in the FFS-approach and devising certain specific technological packages compatible to local conditions.
Long run performance of privatization versus private sector Industrial IPOs in Pakistan
by Muhammad Faisal Rizwan and Safi-ullah Khan
The performance of industrial initial public offerings (IPO) in both the short-run and the long run is examined, based on a sample of 35 Pakistani offerings from 2000 to 2006. In particular, it compares the price behavior of privatization initial public offerings and private sector initial public offering in Pakistan. By analyzing a sample of 35 industrial IPOs, it can be concluded that IPOs tend to out perform the market with a positive initial market-adjusted return of 36.48%. This is consistent with the previous international evidence on new issues, which consistently finds excess returns in the short-run. The long run aftermarket performance for the first two years shows some differences between the three samples. For the sample of all issues the ABHR return is -23.68%. On the other hand, the two years long run performance of privatization IPOs is not only positive (12.69%) but also very large when compared with the private sector IPOs, which is negative (-33.11%), though both the values are not significantly different from zero. The long run performance of privatization IPOs has been remarkably better than the private sector IPOs in Pakistan’s market. Privatization IPOs yield a highly significant mean unadjusted 2-year return of 109.70%. This is nearly two times higher than the average BHR of private sector IPOs.
Impact of Open Sewerage smell on House Rent in Rawalpindi
by Muhammad Irfan
The purpose of this study is to estimate the location dis-amenity (bad smell) due to open sewerage systems in Rawalpindi city. The existing sewerage system comprise of 30% ground and 70% open sewerage system. Households use the side rain drain and Nula Lai for sewerage purpose because of no significant development in public infrastructure. The study used the hedonic property value approach to examine the impact of open sewerage system on the house rent. The study is conducted in both open and ground sewerage systems with different locations. The study estimates that the house rent decrease by Rs. 672 per month if the open sewerage nali is in front of the house. If the open sewerage system is semi closed the willingness to pay for the house rent increases to Rs. 388 per month.
Demand Analysis of Recreation Visits to Chitral Valley: A Natural Resource Management Perspective
by Muhammad Rafiq and Shafiqullah Bangash
The study is about the valuation of tourism’s benefit in Chitral Valley, which offers composite tourism attractions ranging from nature based to religion and cultural products. Accessibility to such natural exotic locations is often free which results in environmental hazards and divests the indigent government from revenue that such sites offers. Natural resource management strategy, hence, necessitates valuing the benefits associated with a natural resource for weighing the cost and benefits of different policy options. For analyzing the problem, Chitral was selected as a case study. The analytical technique employed for this study is Zonal Travel Cost Method (ZTCM) which is a widely used technique and has been extensively used by researchers. The double log functional form was selected for estimating the value of the recreational visits because of the fact that it accounts for extreme value(ward & Beal 2000). The recreational value for the current year has been estimated to be Rs.5225190 million. The results obtained can help the local government for imposition of an optimal entry fee. Additionally, the results of the study will aid the government for efficient resource allocation and to observe changes in the value of natural resources over time. The study will facilitate researchers for future studies on the subject matter.
Dynamism in the Gender Wage Gap: Evidence from Pakistan
by Muhammad Sabir and Zehra Aftab
One of the main caveats of Pakistan’s economic development history is the persistence of gender inequality with respect to almost all socioeconomic indicators. For instance, Pakistan ranks 66, out of 75 countries, with respect to Gender Empowerment Measure (Human Development Report,2006) with a GEM value of 0.377, largely a manifestation of very low estimated female to male earned income ratio, which is a depressing 0.29. GEM and other labour force statistics confirm the gender gap in labour force participation. One of the possible explanations of this gender gap is gender discrimination in the labour market, particularly in wages. This study aims to analyze how the gender wage gap has evolved over the last nine years for the wage employed, by using data drawn from the Labour Force Survey at two distinct points in time: from LFS 1996-97, and than, after almost a decade, in 2005-06. The analysis is disaggregated by occupation, and province.
The results confirm significant gender differentials in relative wages, even after controlling for a range of human capital and job characteristics in the pooled sample as well as in the pseudo panel data analysis. Moreover, estimation results from the two respective cross-sections (1996-97 and 2005-06) show a significant increase in the wage differential over the last nine years. This dispersion of wages among male and female workers, even after controlling for observed human capital and job characteristics, is much higher in Pakistan, as compared to other countries.
Rural-Urban Inequality under Finance and Trade Nexus: An Econometric Evidence
by Muhammad Shahbaz, Naveed Aamir and Muhammad Sabihuddin Butt
Pakistan is a developing economy, which has adopted Structural Adjustment Program (SAP) in the form of economic reforms initiated in early 1990s. Economic reforms related to privatization of state-owned assets, deregulations, confiscation of price controls, trade liberalization generally and financial reforms (especially to improve quality of financial institutions) particularly. The objective of such reforms was to improve the welfare of society but these reforms never fruited to every individual living in the country. Perhaps, fruits of economic reforms are eaten up by poor governance, lack of transparency in economic policies, high level of corruption, high burden of internal and external debts and interest rate payments on these debts, weak situation of law and order, and improper implementation of economic policies.
The present paper explores the understanding between financial deepening, trade-openness and rural-urban income inequality in case of small developing economy like Pakistan. We utilized DF-GLS and Ng- Perron to examine the order integration and modified ARDL co-integration along with Johansson Technique for robustness of long run association between said actors. Our empirical analysis suggests that improvements in financial performance decline the rural-urban income inequality in the case of Pakistan. In contrast, economic growth widens the rural-urban income gap in long span of time. Openness in foreign capital and trade worsen rural-urban inequality situation in Pakistan. Finally, low inflation is associated
with high rural-urban income gap in the country. Present endeavor may open up new directions for policymaking authorities in Pakistan.
Exports and FDI in Developing Countries: Substitutes or Compliments?
by Muhammad Tariq Majeed and Eatzaz Ahmad
This study analyzes the relationship between FDI and Exports, as well their common determinants in developing countries of the world using panel data of 49 countries for the period 1970-2004. Following panel data model, we apply fixed effects model to clearly identify the factors affecting FDI and exports in developing countries. The analysis shows that GDP, economic growth, domestic absorption and exports positively affect FDI, a result consistent with market seeking behavior of multinational corporations. On the other hand external debt and BOP deficit have negative effects on FDI. The effect of domestic investment in explaining FDI flow is negative. This is so because an increase in domestic investment leaves little room for FDI. The effect of taxes is negative and insignificant. The negative relationship implies that lack of fiscal incentives is a hurdle for FDI. However if overall investment climate is sound then MNEs overlook it. It is also found that depreciation of real exchange and industrialization and development of communication facilities significantly promote exports. Empirical evidences indicate that the effect of increased FDI has been found significantly positive, whereas, in the reverse direction,
the positive impact from increased exports on FDI is confirmed at lower levels of significance. Thus, there is no evidence of a substitution relationship of FDI and exports so far.
The Politics of Depoliticization in Natural Resource Management: Representation of the State in Watershed Development Projects in India
by Neeraj Mishra
This paper will locate the control mechanisms that the state in the form of its 'street-level bureaucrats' maintains in the project activities and the things that the ground level functionaries and officials do in the name of the state. The World Bank and modern developmental configuration places a strong emphasis on the decentralized form of governance in the project such that the roles and powers of the local community are redefined towards achieving a participatory development. However, the management of the project at the local level is dominated by the institutional configuration that the state agents create in the village, which is highly exclusive in nature. There is a general agreement among the people about the state as being corrupt and thriving on the politics of favoritism, which stems from the actual working of the state agents in terms of the actors in the village who receive powers in the project, the type of powers they receive and the control mechanisms that keep them in their positions sub-ordinate to the government staff. This would lead us to the question, if one could infer this governing strategy of the project as a mechanism of depoliticization.
Intellectual Property Rights (IPRs) and Economic Growth: A Case Study of Middle-Income Developing Countries
by Pervez Zamurrad Janjua and Ghulam Samad
Neo-classical growth theory emphasizes the role of intellectual property rights (IPRs) in economic growth process through different channels like international trade, foreign direct investment (FDI), licensing as well as research and development (R&D). This study estimates the impact of IPRs protection on economic growth for a panel of ten middle income developing countries by using pooled least square estimation technique and applying both fixed and random effect methods. The investigation considers unbalanced data from 1960-2005 and balanced data from 1970-2005. The results do not support a positive link between IPRs and economic growth for middle-income developing countries. IPRs protection may stimulate economic growth through internal and external sector under certain circumstances, but these developing countries are at the transitional stage of their economic development and at this stage the cost of innovation is higher than the cost of imitation. It means that at present stage of economic and infrastructure development the middle income developing countries have to devise a comprehensive policy of IPRs protection in order to face the challenge of WTO in the form of Trade Related Intellectual Property Rights (TRIPs) agreement.
Understanding Poverty Through the Eyes of Low Salaried Government Employees (BPS-1-5): A Case Study of NED University of Engg.& Tech., Karachi
by Raza Ali Khan
Poverty has been an important area of interest for researchers, governments, United Nations agencies, NGOs and some specialized international development agencies.
Poverty is a huge, complex and confusing term. Although relevant literature is available on this issue, there is no harmony in the notions and descriptions of the phenomenon ofpoverty.
Poverty is a multidimensional concept involving not only economic but also social deprivation. It includes the ability to lead a long, creative and healthy life, to acquire knowledge, to have freedom, dignity, self-respect and respect for others, and to have access to the resources needed for a decent standard of living. It is an outcome of interaction of economic, social, legal and political processes mediated through a range of institutions.
We explore this problem from the realities, experiences and perspective of Low salaried govt, employees. Hence the Purpose of this study is to provide a detailed account of the living conditions of low salaried government employees (BPS 1-5) working in NED University of Engineering and Technology Karachi vis-a-vis the increasing cost of living and deteriorating real incomes. The study will also examine the major causes of poverty among low salaried government employees and determined their perception of poverty.
Finding of the study reflected that poverty is a multidimensional phenomenon and the perception ofpoverty and its causes vary from person- to- person and group - to - group. It varies by social, cultural and economic contexts. Also a person's status, class, and location affect perceived causes ofpoverty.
Quantifying the Impacts of Development of Transport Sector in Pakistan
by Rizwana Siddiqui
The paper quantifies the impact of tax-financed public investment in infrastructure and services by mode of transportation, land, air, and water using dynamic computable general equilibrium model with a detailed module of land transport. The model includes cost of transportation namely resource cost and taxes and cost of externalities such as congestion, pollution, and accident. Congestion cost is endogenous in the model, whereas pollution and accidental effects are calculated exogenously on the basis of endogenously determined land transport services. The model measures benefits by the change in prices not only in the transport sector but also take care of the benefits to other sectors of the economy.
The results show that tax financed investment has reduced share of domestic transport and cost of nonfactor services in the total value of commodities (first objective of NTC). It also reduces transport cost associated with passenger movement. Improved safety and reliability of transport operations can be concluded from reduction in environmental and accident cost (2nd objective of NTC). The transport sector development has positive impact on macro aggregates such as growth and exports.
The Determinants of Corporate of Debt Policy –Pre and Post Financial Market Reforms (A Case from Textile Industry of Pakistan)
by S.M.Amir Shah
This study investigates the effect of pre and post financial market reforms on corporate debt policy and explores the evidences for static trade off theory and Pecking order theory in financing decisions of Textile Sector of Pakistan. The Analysis depicts, that reforms have statistically significant effect on debt policy of textile industry. Negative coefficient of profitability decreased from 0.85 to 0.23 which changed its strong negative relationship with debt to weaker negative relationship with debt and improved its weaker relationship with tangible assets to strong positive relationship with debt as evident from coefficient 0.29 to0.61. This improvement can be attributed to the financial market reforms. However during the total period under analysis the industry remained under the same debt burden of 82 percent of its assets. High operating expenses and cost of goods is associated reason of financial distress. Results show on average, the industry in the ten years (1995-2004) earned nothing. To capture the firm specific effect, fixed effect model has been used. The evidences of firm specific effects on the use of debt exist. Analysis gives no support to trade off theory for textile sector of Pakistan. However, there is some support for pecking order theory.
An Analysis of Pakistan’s Vulnerability to Crisis
by Safdar Ullah Khan and Omar Farooq Saqib
The objective of this study is to analyze the vulnerability of Pakistan’s economy to crisis by evaluating the sustainability of its external and fiscal positions in the recent past. Following the emergence of current account deficits and fiscal imbalances in the last two fiscal years, skepticism on the sustainability of these fundamentals has grown. Therefore, this study uses Masson’s (1999) model of contagion to find the degree of susceptibility of Pakistan’s economy to crisis through assessing its external position and Bohn’s (1998) fiscal sustainability regressions to evaluate its fiscal position. Our findings are that the Pakistani fundamentals do not present an adverse scenario as its external balances signal low probability of crisis and its fiscal balances have remained sustainable both in the long run and in the recent past.
Gender, environment and sustainable economic growth
by Saima Akhtar Qureshi, Muhammad Khan and Muhammad Iftikhar ul Husnain
Standard growth models such as those of Nelson and Phelps, Lucas, Rebelo and others assume that production can be sustained with an insignificant amount of natural resources and environmental services if labor and capital can be improved adequately. The notion that the economy can grow sustainably forever depends in large part on the assumption that technological improvements can trim down the number of units of natural capital necessary to produce a unit of economic output. Also many studies, such as those by Davidson and Myers, Dankelman & Davidson have indicated that women are responsible for the environment care and play a predominate role in the management and use of natural resources. These studies emphasized that women must be involved in decision making at all level to foster sustainable economic development and growth. The paper develops a simultaneous equation model to highlight the notion that increase in human capital of women substitutes natural capital and hence leads to sustainable economic growth in Pakistan. Regression results show that growth in female-male enrolment (used as proxy for human capital) has positive and significant impact on economic growth. Our estimates show that the improvement in human capital substantially reduced the extraction and consumption of natural resources. We found that growth in female-male enrolments ratio is positively related with growth in forest area cover at different level of education, confirming the notion that increase in human capital can successfully substitute natural resources at certain level in the process of economic growth. The study confirms the arguments that women are efficient environmental managers within the developmental process of the economy. However study also found a strong inter-relationship between environment and human capital accumulation. The depletion of natural resources and environmental pollution inversely effect the human capital accumulation. The study stresses that government should ensure universal primary education, provision of safe drinking water, electricity, and gas to protect natural resources and to empower sustainable economic growth.
Role of Tourism in Economic Growth: Empirical Evidence from Pakistan Economy
by Samina Khalil, Mehmood Khan Kakar and Waliullah
This paper examines the role of tourism in the short run economic development in case of Pakistan. Through error correction mode, and also see the Causal relationship between Tourism receipts and economic expansion (GDP). The results points that there is strong relationship among tourism, receipts and economic expansion whicht means that economic expansion is necessary for tourism development in Pakistan.
Development and Management of Land Resources
by Sarfraz Khan Qureshi
Sustainable Income, Employment and Income Distribution in Indonesia
by Seeme Mallick
In this paper sustainable income of Indonesia is estimated by incorporating environmental capital depreciation allowance. The natural resources of Indonesia are valued as capital asset and a depreciation allowance for its maintenance is estimated and incorporated into a Keynesian Model of Income Determination for estimating sustainable income. The aim is to analyze the possibilities of achieving both sustainability and full employment in the economy. To explore the linkages between environmental depreciation, income distribution and employment, Gini Coefficient and Lorenz Curve are applied to this analysis. Policy options based on income distributional impact of environmental capital depreciation allowance are discussed in detail.
Return to Education in Pakistan
by Shabbar Jaffry, Yaseen Ghulam and Vyoma Shah
This paper investigates whether the education inequality in Pakistan vary across the wage distribution of individuals. To do so, it adopts a quantile regression framework, which then uses different quantile spreads to analyse the conditional inequality using the data drawn from the Labour Force Surveys over the time period of 1990 to 2003. The analysis also shows how the return to education varies when used different set of variables and combinations is used. Education coefficient decreases when posteducation decisions are introduced. This paper uses pooled data as well as pseudo panel approaches as LFS are not continuous cross section surveys and findings suggest that results obtained from pseudo panel approach are more robust than the pooled sample data. The estimates also show that the evidence of conditional education inequality in Pakistan and also show that inequality has increased over the years. The conditional inequality has been increased from 1.13 to about 1.26 from 1990 to 2003 sample period. Estimates also have been produced for different level of education and categories like provinces, gender, area of living and industries. The highest increase in conditional education inequality is found for the person who has completed matriculation or intermediate qualification compared to all other education levels.
Land and Water Resources of Pakistan-A Critical Assessment
by Shahid Ahmad
Tradition and Sovereignty: Conflicts Over the Forests of Dir-Kohistan
by Shaheen Rafi Khan
Natural Resource Management and Economic Growth in Pakistan: A Time Series Analysis
by Shahnawaz Malik, Imran Sharif Chaudhry and Shahzad Hussain
Natural capital can play an important role to boost the economic growth and to accelerate the pace of development. Evidence is found that the countries having vast natural resources could not perform significantly compared with the countries deficient of natural capital. This paper empirically explores the contribution of natural resources to economic growth for Pakistan for the period of 1975-2006 using time series econometric technique. The results are very much similar with existing literature available on the subject. There is adverse nexus between exports related natural resources as ratio of GDP and economic growth. Our findings also indicate that inadequate attention has been paid to human resource development in Pakistan throughout our sample period.
What Turns a Blessing into a Curse? The Political Economy of Natural Resource Wealth
by Syed Mansoob Murshed
I review the relationship between natural resource endowment type and economic growth in developing countries. Certain types of natural resources such as oil and minerals tend to exhibit concentrated production and revenue patterns, while revenue flows from other resources such as agriculture are more diffused. Most developing countries that export products from the first group are prone to growth failure in recent times. The most important channels are political economy mechanisms, where there are negative relationships between natural resource rents and institutional development. An explicit model of growth collapse with micro-foundations in rent-seeking contests that have increasing returns in rent seeking outlays is presented.
Management of Energy Recourses, Marginal Input-Output Coefficients and Layers of Techniques: A case Study of US Chemical Industry
by Toseef Azid, Mumtaz Anwar and M Junaid Khawaja
Natural Resources Conservation for Poverty Alleviation by Making the Farmers Partner with Empowerment
by Umar Farooq, Munir Ahmad and Abdul Wahid Jasra
The importance of natural resources in sustaining productivity and environmental protection is now relatively more realized than the past. Its linkage to poverty alleviation by making the farmers partners in the development process with empowerment is relatively a new concept. This paper attempts to sensitize the policy makers and development planners for
creating awareness and practicing partnership with empowerment in planning and implementation of various development projects. This is also desired because many technological interventions are abandoned by the farmers after the withdrawal of
Crop and livestock sectors are now almost equal contributor in total agricultural GDP. Natural resources like land, water and rangelands are important for both crop and livestock farming which now becoming more limiting factors of production. Pakistan agriculture relies on irrigation for more than 90% of its agricultural production. The future expansion in agricultural production could be only achieved by utilizing more efficient production techniques with least resources quality deterioration impacts.
The review of available evidence on utilization of land, water and rangelands resources in Pakistan shows that in the past, they were unwisely and inefficiently utilized with low marginal productivity enhancement impacts. Continuation of these practices may result in irreversible losses, and such consequences are not affordable. Unfortunately, the farming community is not realizing the nature of these consequences and more importantly they would be the real affectee. One of these consequences is operating in low input-low output domain with low productivity and sustained poverty impacts. Conserving natural resources through community mobilization with empowerment fervour can be a viable option under win-win scenario and poverty alleviation impacts. The basic requirement is that local communities should own it in right spirit and struggle for earning empowerment by becoming partner in the development activities of their own areas. This will not only make easy access to various institutions working for finding solutions to their problems, it will also make the tasks of various public and private development institutions and NGOs relatively easy. This paper highlights the mechanisms of partnership in conserving natural resources along with put forwarding various suggestions.
Environmental Effects of Trade Liberalization: A Case Study of Pakistan
by Usman Azhar, Samina Khalil and Mohsin Hasnain Ahmed
To foster the pace of economic growth trade liberalization is the common policy option for the policy makers of developing countries. Tradeoffs between environment and economic growth define the nature of environmental degradation. Such issues are complicated, thorny and increasingly salient on the international stage because of their trans-boundary consequences. As contrary to developed nations, to keep the balance of payments in their favor, the developing nations are more dependent on agricultural sector and exploitation of natural resources. To increase the volume of trade the overexploitation of natural resources is causing many environmental problems and this is a continuous phenomenon. Living conditions are getting worse and standards of living are falling in real terms.
The impact of trade liberalization is transmitted towards environment in several (sale effect), the scale effect is detrimental to the environment. A country may specialize towards specialization or away from the production of relatively pollution intensive commodities, or use cleaner/dirtier technologies to produce commodities (technique effect). Trade liberalization can also effect the composition of output produced in an economy (composition effect). Composition and techniques effects are negatively related to the environmental quality.
The theme of this paper is to investigate empirically the impact of trade liberalization on air and water pollution in Pakistan. The Johansen co-integration method and error-correction model technique has been used in order to examine the long run and the short run dynamic of system respectively.
Findings indicate that Long run coefficients of trade intensity and scale effect are significantly related to air and water pollution. Thus, scale effects of trade liberalization are detrimental to the environment. While composition and technique effect negatively related to pollution. Overall finding suggest that to maximize the gains from liberalization, and to achieve a
sustainable and high-quality growth path, Pakistan must minimize the environmental costs associated with its industrial development. It is important to recognize that even if the composition effect is held constant, the scale effect induced by growth implies an increase in output and an increase in total industrial pollution. To keep the scale effect in check, the pollution intensity of industrial activity must be decreased. This is possible through the transfer of cleaner technology if sectoral pollution is a function of the vintage of technology and through the enforcement of environmental regulation where pollution depends on end-of-pipe treatment, as in the paper, leather and textiles industries.
Environmental Fiscal Reforms and Decentralization for Sustainable Development and Poverty Eradication
by Usman Mustafa
Environment degradation and augmentation of poverty are producing extremely serious peril not only for the present but also for the future generation. The situation is aggravating day by days. This is mainly due to the distortion in the market systems. The EFR through decentralization measures can rationalize tax arrangement and distribute resources effectively and efficiently. The devolution of power is a step forward but required corresponding fiscal decentralization and political wills. The lower tires of governments have meager resources along with poor skills, infrastructure, and institutions, which needs improvement. EFR can generate benefits in terms of fiscal revenue, environmental outcomes and poverty reduction in local districts, greater opportunities for empowering and serving the poorest people, and, as a result sustainable development.
Causes of Youth Unemployment in Pakistan
by Waqqas Qayyum
IPI Gas Pipeline:- An Economic Analysis in Game Theoretic Framework
by Zahid Asghar and Ayesha Nazuk
In this paper we have analyzed the so-called Iran-Pakistan-India (IPI) gas pipeline in game theoretic framework. The paper develops models for cooperative and non-cooperative strategies of Iran and Pakistan and analyzes the expected profits and the prices for the player. Importance of IPI gas pipeline has also been highlighted for the economic development of the each country involved in this project. This IPI gas pipeline is called peace pipeline in the jargon of political language but we have not discussed in geo-political scenario and therefore, did not include key players like USA in our model.
Sukuk-Structures an Analysis of Risk-Reward Sharing and Wealth Circulation
by Zohra Jabeen
As Islamic business and finance flourishes, considerable progress is made in developing powerful and effective products that are practical as well as Sharia’h compliant. Sukuk appear to be one of such products. Its issuance is a relatively new trend, since its dawn on the global scene in 2002. The development of hybrid products is widespread in finance. The derivative securities’ phenomenon and the process of disintermediation in the conventional (capitalist) financial system have important bearings on product development, worldwide. Sukuk too appears to be one of such hybrid products. This paper shall attempt to discuss the sukuk dynamics, as a product of Islamic finance by examining its features and underlying structure, with the baseline of Sharia’h permissibility. From the perspective of its utility in Islamic Finance, and justice in the society, it picks a sample from the current sukuk structures for testing two basic questions/criteria, the risk & reward sharing and secondly, wealth concentration or circulation. Besides, the basis for picking these criteria is discussed.
Land Inequality by Mode of Irrigation in Pakistan: 1990-2000.
by Rashida Haq
The aim of the study is to estimate the magnitude of inequality in land distribution by mod of irrigation in two agriculture census period, 1990 and 2000. It also analyzes relative equity performance in cultivated irrigated area as compare to total cultivated area. Theil’s indices of inequality illustrate that there exist a considerable levels of inequality in the distribution of all land variables in all areas which has also increased over the two agriculture census period. There is a significant level of increase in inequality in cultivated area irrigated by canals except in NWFP province whereas inequality in irrigated area by tubewells has increased in all provinces in 2000. The equity index for irrigated area by canals has gone up indicating that the distribution is inequity increasing in Pakistan. In Sindh province the picture is not encouraging for irrigated area by tubewells as the distribution is inequity increasing in two periods. Relative equity performance for irrigated area by canals and tubewells is worsened in Balochistan province. Finally, the present highly skewed land distribution provides to large farms disproportionately large shares of incremental benefits from irrigation development.