Promotion of innovation and S&T enables economies to achieve sustainable economic growth. In addition, firms engaged in medium- to high-tech production tend to gain more from innovation and are, on average, more productive compared to enterprises which are limited to low-tech systems. Innovation is, in turn, inextricably linked to the availability and nature of financing. Empirical studies in developing countries reveal that bank financing and FDI can play a vital role in this regard. This paper provides an overview of: (a) the role of financing in facilitating innovation and S&T; (b) State Bank of Pakistan’s policy initiatives to make financing available, both in general, and also to specifically facilitate innovation and S&T in the country; and (c) the role of innovations in expanding access to finance in Pakistan.
KEYWORDS: Technological innovation, R&D, policy, banks.
JEL: G21, E61, O32.

A large proportion of women in Pakistan engage in home-based production rather than wage employment in the public space to generate an income. This article provides an overview of the literature on the role of access to finance and women’s decision-making power (at the household level) on the likelihood of business creation and growth by women. The literature shows that finance has little impact on business and household outcomes; this suggests that other constraints are at play when it comes to women setting up an enterprise or making business decisions. This overview shows how self-control – risk aversion and present biasedness – can inhibit business investment. Household members may also ‘capture’ a woman’s financial resources, including business loans or savings, and put them to unproductive use. Further, social and cultural norms may dictate whether setting up an enterprise is seen as an ‘appropriate’ activity for women. Against the backdrop of several government and private initiatives to promote enterprise, exploring these issues provides us with important insights into how female-run businesses can be encouraged and supported.
KEYWORDS: Entrepreneurship, microfinance, credit constraints, household decision-making, norms.
JEL: J16, D14, 012, P34, P36.

Recognizing that Pakistan faces premature deindustrialization, this paper seeks to explain the phenomenon. The country experienced wild swings in industrialization during the 1950s and 1960s. The period 2001–10 was characterized by fairly strong growth, followed by contractions in other periods. Pakistan’s manufacturing sector is dominated by clothing and textiles exports. Periods of manufacturing growth were associated with pro-manufacturing and import substitution policies, while slumps were characterized by deregulation and a relatively high exchange rate. The evidence shows that the relative stagnation of manufacturing (regardless of the policies implemented) can be explained by the lack of a dynamic industrial policy targeting technological catch-up and leapfrogging. Moreover, where rents were distributed in the form of incentives, there was no emphasis on monitoring and appraisal.
KEYWORDS: deindustrialization, industrial policy, technological upgrading, Pakistan.
JEL: L52.

At a time of rapid technological advancements in every field, Pakistan must develop a comprehensive strategy for harnessing science and technology to promote economic growth on a sustained basis. In recent decades, successful economies have moved away from factor accumulation models of economic growth to productivity led growth that is underpinned by technological advancements and innovations. Using the endogenous growth theory as a framework of analysis, the paper will provide a macroeconomic perspective on the importance of technology and innovation for sustainable economic growth. We argue that public policy must be geared to generate robust growth by encouraging investment in research and development (R&D) and human capital. The paper will conceptualize the role of technology in the process of economic growth and identify policy areas that can be instrumental in promoting technological modernization and innovations. The paper will also survey some illustrations from Pakistan’s telecommunication industry.
KEYWORDS: Policy, innovation, economic growth, technology, telecom, Pakistan.
JEL: O14, O32.

The Lahore School of Economics and the Lahore Chamber of Commerce and Industry (LCCI) conducted a unique business confidence survey of firms in March 2015. The objective of the survey was to determine industry-specific trends as well as firms’ perceptions of general macroeconomic trends. In 2016, the Lahore School and LCCI conducted a second business confidence survey in which they asked a sample of firms about the same issues as well as their level of innovation and technological upgrading. In this paper, we focus on the results of the innovation and technology component of the 2016 survey. We perform an aggregate analysis across firms to see if they have innovated and upgraded their technology. Next, we focus on the impact of innovation on exports and domestic sales to gauge whether firms reporting higher exports had innovated more. Finally, we look at each sector (manufacturing, services and retail) in turn and analyze the levels of innovation and technological innovation in each.
KEYWORDS: Innovation, technology, macroeconomic trends, business confidence survey.
JEL: O14, O11.

Pakistan’s lack of industrial progress over decades should be cause for concern about the future. The goods the economy produces competitively are the typical goods that yield so little income that they are only exported by economies that have low wage labour. They are much the same manufactures now as during the 1960s and have been kept competitive by keeping wages down through repeated devaluation. Income per head will rise slowly, at best, if the economy does not learn how to produce goods that yield more income, and that means acquiring the up to date technical knowledge needed to be competitive from the foreign producers who produce such goods. But that is knowledge obtained through R&D and is not provided freely, least of all to would-be competitors. Pakistani firms can try to do their own R&D, but, even with public sector collaboration, they cannot catch up with the established foreign firms, which continue to do their R&D and have more money, experienced staff and facilities. The two possibilities are to attract foreign direct investment and for Pakistani firms to insert themselves into the production processes of foreign firms. Experience shows that the first, though it has worked well in several countries, can be ruled out for the present; there has been no FDI in Pakistan for making exportable manufactures. But economies like South Korea and China acquired the technical knowledge they needed through subcontracting and joint ventures with American, European and Japanese firms and moved on from there. There is no realistic alternative and task ahead is to determine what has to be done to realize it.
KEYWORDS: Science and technology, R & D, productivity, innovation, Pakistan.
JEL: O14.

Numerous public announcements are made regularly in Pakistan about moving towards a knowledge economy. These appear to be wishful thinking in the absence of any coherent understanding of the role of technology and its spillovers as major drivers of development and growth as well as lack of clarity about the manner in which science and technology are organized in Pakistan. Pakistan has not really been able to manage the major organizational changes brought about by the techno-information revolution of the 21st century. Its competitiveness is falling, organizational changes are slow and workforce skill levels are inadequate – all of which have stalled productivity and innovation. Pakistan faces a serious risk of deindustrialization unless the dynamics and disruptive nature of modern technology are better understood and embedded as a key pillar of public policy in order to enhance productivity and innovation. This article attempts to define the nexus between technology and entrepreneurship and show how it differs from scientific research. It also examines the role of public policy in promoting productivity growth and entrepreneurship through better policies in technology management.
KEYWORDS: Productivity, growth, public policy, technology, Pakistan.
JEL: O39.

This paper estimates the aftermarket performance of initial public offerings (IPOs) listed on the Karachi Stock Exchange. The evidence confirms that IPOs generate statistically significant abnormal returns in the short run, which indicates that underwriters initially underprice IPOs when analyzed using a short time horizon. However, when using longer time horizons to estimate abnormal performance, the results indicate that IPOs underperform in the long-run. There is an apparent dislocation between the initial valuation set by underwriters and the premium paid by the market for these new issues. The market sentiment that causes this temporary disequilibrium eventually fades and the market reprices the newly issued shares. We conduct an extreme bounds analysis to test the sensitivity and robustness of 16 explanatory variables in determining the long-term performance of unseasoned newly issued shares. The results indicate that the long-term investment ratio, industry affiliation, market-adjusted abnormal returns, financial leverage, return on assets, IPO activity period, the aftermarket risk level of unseasoned issues, and the post-issue promoter’s holdings variables significantly affect IPOs’ aftermarket performance. Theoretically, the overreaction hypothesis, ex-ante uncertainty hypothesis and window-of-opportunity hypothesis best explain IPOs’ aftermarket performance in this study.
KEYWORDS: Initial public offering, underpricing, underperformance, extreme bounds analysis.
JEL: G32, G14, G23.

This study examines the impact of remittances on school enrollment and the level of education attained among children aged 4–15 years in Pakistan. It uses a nationally representative survey, the Pakistan Social and Living Standards Measurement Survey for 2010/11. The migrant network variable at the village level interacting with the number of adults at the household level is used as an instrument for remittances. The results of the IV probit model show that children from remittance-receiving households are more likely to enroll in school. The marginal impact of remittances on school enrollment is larger for girls and for rural households. Hence, remittances help reduce regional and gender disparities in child school enrollment in Pakistan. The IV censored ordered probit model is used to investigate the impact of remittances on children’s grade attainment. The estimated impact is negative and significant, except for urban children, lowering the probability that a child will move to a higher grade.
KEYWORDS: Child education, school enrollment, educational attainment, remittances.
JEL: O15, I25.

This study examines the behavioral aspect of Pakistan’s energy crisis by comparing electricity consumption in the public and private sectors. Specifically, we compare consumption patterns of electricity across a sample of student hostels at two public sector universities and privately run student hostels. In addition, we collect household data for a sample of students at Quaid-i-Azam University (QAU) in Islamabad and compare their average electricity consumption with that of the public sector university hostels. We find that the latter’s average consumption of electricity is significantly higher than among private hostels and households. In assessing the moral hazard problem of the public sector in this context, we test the energy conservation behavior of QAU students and the university administration. The results show that students are largely indifferent to conserving electricity, while the administration pays little attention to the use of energy-efficient lights and equipment.
KEYWORDS: Electricity consumption, public sector, private sector, moral hazard, conservation of electricity, organizational inefficiency.
JEL: H83, D00, D12, D03, D04.