Pakistan Journal of Applied Economics

1-24

Authors: D.I. EYAREFE* and Gbenga P. SANUSI**

Education represents the bedrock of intellectual and citizen consciousness for development of any country. However, the success or failure of many education policies and programs rests on the level of funding and management, to a large extent. This study examines the level of funding and management under two different regimes in Nigeria; the civilian and military. The sources and associated problems with government funding of public higher institutions are identified as well as their possible imparts and implications. Descriptive Statistics and Ordinary Least Square (OLS) regression were employed in comparing the funding and management of education during the two regimes in Nigeria. The relationship between the government capital and recurrent expenditure on education and economic growth during the years under review, were equally established. The study reveals that though the funding of education is under the concurrent list in constitution, it has received less than the expected funds from both the federal and the state governments under the civilian and military regimes, especially the military government. Thus, the near total of the sector and the unimaginable loss of income to other nations collapsed, through immigration of Nigerians to other parts of the world for qualitative education and the teeming figure of the unemployed. To foster a more efficient and effective funding of education for a more robust higher learning institutions in Nigeria, the implementation of the UNESCO recommendations of twenty-six per cent of annual budget for the education sector is a necessary condition. Private corporations should be encouraged to increase their social responsibility to the education institutes.

45-66

Authors: Abdul HANNAN* and Hasan M. MOHSIN**

Natural resources are generally considered to be very important for development of any country. Sachs and Warner (1995) empirical study initiated a new debate in the field of economics that countries where natural resources are in abundance have slow growth than the countries which are resource deficient, called the resource curse hypothesis. Many studies have empirically tested this hypothesis and found mixed results. Most of the studies in literature have used primary products exports as a measure of resource abundance which is not very appropriate. This study extends the literature by using various proxies of resource abundance and has decomposed the total natural resource rent to oil, gas, and mineral rents. The study further includes various regions in the empirical analysis to find whether resource curse is region specific or not? Almost all possible channels of resource curse have been investigated. Empirical estimates by using panel data technique (within effect model) have also been provided. The results indicate that natural resources do not adversely affect economic growth directly in the large sample of 170 countries for the period 1991 to 2011. Regional analysis of resource curse hypothesis revealed that South Asia is the only region where resource curse exists with all types of resources because of low level of institutions. In all other regions, natural resource rents positively impact the economic growth.

119-233

Authors: Kaiser BENGALI*

Despite seven decades of independence of Pakistan, large parts of the country remain woefully undeveloped with poor infrastructure and limited income generating opportunities. Balochistan stands out in this respect. However, development is possible. Balochistan has a manageable population, comprising just 1.5 million families. At one job per family, Balochistan needs to provide just 1.5 million jobs. This is eminently feasible and it is possible to create an almost zero-unemployment economy in Balochistan. There are a number of theories of under-development and of growth. The theories that best fit Balochistan are ‘Big Push’ and ‘Unbalanced Growth’. The two theories postulate that the injection of a large project in any one sector creates an imbalance with respect to other sectors. However, the project performs the role of an ‘engine of growth’ and propels growth in other sectors. Balochistan is, as yet, a primary sector economy of Pakistan; more specifically, it is essentially a pastoral economy. As such, it is prudent for the province to concentrate scarce fiscal resources in selected sectors and aim to obtain maximum impact. More importantly, it is necessary to chart a vision and set a direction. A vision sets the direction, which – sequentially – enables a strategy to be formulated, a policy to be framed, plans to be drawn and, accordingly, schemes to be prepared and implemented. Today, the development process has been turned on its head. Schemes are prepared and (half) implemented without the context of a plan, a policy, a strategy, a direction, or a vision. The result is expenditure of billions of rupees in the name of development, without any meaningful development.

121-142

Authors: Imran Riaz MALIK* and Attaullah SHAH*

During the market turmoil, and later in the year 2008, the Securities and Exchange Commission of Pakistan (SECP) decided to discontinue the trading in single stock futures (SSFs) at the Karachi Stock Exchange (KSE). On 27th July 2009, trading in SSFs were re-launched in those stocks which passed the stringent criteria set by the SECP. While the overall market is in a transitional stage, there is a need to assess this new situation in order to improve and regulate the available futures contracts, as well as, the upcoming options contracts. In this vein, this study attempts to investigate the impact of parallel SSFs markets on the underlying spot market by examining whether the introduction of futures has played a role in destabilizing the market. The results suggest an insignificant change in coefficients used to gauge the market inefficiencies, feedback trading, trading volume, and volatility. This may imply that stringent contract specifications have helped to mitigate the potential destabilizing ability of SSFs.

159-177

Authors: Muhammad Shahid HASSAN,* Ayesha WAJID,* Qazi Muhammad IRFAN,* Muhammad Naveed TAHIR,* and Noman ARSHED* READ MORE

This study explores the price and non-price factors which affect the real imports in Pakistan. It considers the Bounds Testing Approach to investigate co-integration between the real imports and its factors in the long-run; and the Error Correction Model based on Bounds Testing Approach in order to find the impact of price and non-price factors on imports in the short-run, respectively. The findings reveal that real exchange rate per capita GDP, rural population, urban population, and money supply are among important factors which significantly accelerate the real imports in Pakistan, whereas, the domestic inflation have found to be depressing force for real imports. Moreover; the coefficients of factors of real imports were to be structurally stable for the selected sample period. Finally, the study suggests that it may not be appropriate to use the exchange rate policy from the perspective of imports to improve trade balance in Pakistan.

1-15

Authors: Ihtisham ul HAQ,* Mohammed Saud M. ALOTAISH,* Naradda Gamage Sisira KUMARA,* and Shavkat OTAMURODOV*

Considerably more commodities are available to consumers in open economies and openness brings these at cheaper rate, according to Rome’s hypothesis. The Johansen cointegration technique nullified Romer’s hypothesis that greater openness brings less inflation. Economic growth had significant positive impact on inflation, which is according to realm of Phillips curve and Okun’s law. Supply of money was also documented by positive effect on inflation, as the classical neutrality of money reveals. This study recommended that Sri Lankan government should be very careful in policies regarding supply of money and openness as it hurts consumers.

39-73

Authors: M. Tariq MAJEED* and Guangfeng ZHANG**

This study analyses the impact of trade on within-country inequality using a panel data set from 65 developing countries [see, Appendix (Table A-2)]. This study differs from the existing literature on distributional impact of trade by explicitly noting the importance of development stage in shaping the link. The analysis shows that the effect of trade on inequality depends upon the level of GDP-per-person (to some extent a proxy for economic development) of the trade-integrating economy. Among the developing economies, those with a high level of GDP-per-person enjoy a favourable effect of trade openness on income distribution, while the impact is unfavourable for those with low GDP-per-person. In sum, trade does not accentuate ameliorates inequality in developing countries with the low level of economic development – the opposite of the prediction of standard economics [Heckscher-Ohlin (HO) Model]. The HO model implies that free trade between labour-intensive (developing) and capital-intensive (developed) countries should lead to more specialization in labour-intensive products in developing and capital-intensive products in developed countries. This should bid up the price of labour, relative to capital in developing countries, and vice versa in developed countries, increasing inequality in developed countries and decreasing it in developing countries. The Stolper-Samuelson theorem has similar consequences. Findings of the study are robust to the sensitivity analysis, different estimators, inclusion of regional and time effects.

73-95

Authors: Haroon JAMAL* and Sohail JAVED**

The study provides estimates of overall incidence, as well as, the distribution and burden of General Sales Tax across household welfare levels by applying the latest available household consumption data. The analysis is carried out at national, regional and provincial levels; separately for food, non-durable and durable expenditure items. Effective GST rate across deciles of per capita expenditure and Kakwani Summary Index of tax progressivity are estimated for the year 2010-11. Results in general, indicate proportionality of GST incidence associated with some progressivity at the upper part of income distribution. The relative intensity in terms of magnitudes of Kakwani Index indicates regressivity in GST on food and progressivity on durable expenditure items. A simulation exercise is also carried out to observe the impact of non-uniform GST rates for expenditure commodity groups on distribution of the tax burden.

115-139

Authors: Aliya BUSHRA** and Nasra WAJIHA***

Women empowerment is one of the most important factor which is now being discussed in nearly all developing countries. In this paper, an attempt is made to explore the determinants which have an influence on women empowerment in Pakistan. The sample of the study covers 200 female respondents of the two renowned colleges of Lahore. The empirical results of this study show that contents of education, economic participation of women, poverty and economic opportunity available to women increase their empowerment. In this study, apart from the conventional variables, a variable, “women” maintaining a bank account was also tested, which showed an extreme significant and positive impact on women empowerment. This supports the economic opportunity available for females to increase their weightage in the society. Finally, it is concluded that these significant factors influence empowerment of women, and therefore, one can focus on these determinants to increase and enhance women role in the culture of Pakistan.

1-12

Authors: Zahid AHMAD* and Anam TARIQ**

The paper examines the impact of international trade on tourism of the top ten GDP ranking countries of South and South East Asian Region for a period of 15 years, 1995 to 2009. The study includes two independent variables of trade: imports and exports, and one dependent variable of tourism – the number of tourist departures. Pooled Regression Model, Fixed Effect Model and Random Effect Model have been applied as a research tool. Results of the study reveals that the international trade and tourism industry help to promote economic development of countries of the South and South-East Asian Region.

31-54

Authors: Naeem AKRAM* and Asma GULZAR**

Though the Pakistan’s contribution to greenhouse gases (GHG) emissions is miniscule as compared to other countries i.e., only 0.8 per cent of the total GHG emissions, yet it is one of the major victims of climate change effects. The present study is an attempt to explore the impacts of climate change on economic growth of Pakistan by conducting national as well as provincial level analysis for the period 1973-2010. The study uses temperature as proxy for climate change. It has been found that temperature has a negative and significant relationship with GDP and productivity in agriculture, manufacturing and services sectors. However, severity of these negative impacts is higher in agriculture in comparison with manufacturing and services. The provincial results suggest that there is a negative and significant relationship of climate change with growth in the provinces of Balochistan and Khyber Pakhtunkhwa (KPK) while insignificant relationship with growth in Punjab and Sindh provinces. The results reveal that a comprehensive policy regarding adoption of mitigation strategies to combat climate change is very crucial for Pakistan.