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Compensation structures of public sector employees have significant implications
for public service delivery and employment. If public sector employees get relatively lower
pay, then the government can face difficulties in retaining trained and qualified workers.
However, if public sector employees receive higher salaries it is possible that younger
people may prefer to join the public sector. If this is accompanied by limited job absorption
capacity in the public sector, it is possible for there to be substantial unemployment. This
study has analysed the wage differentials by using the data from the Pakistan Labour Force
Survey 2020-21. Blinder-Oaxaca decomposition suggests that at the executive level, public
sector workers are facing wage penalties, while other occupational groups in the public
sector are enjoying wage premiums. The highest wage premiums are for clerical staff
followed by unskilled workers, services, technician, professionals and agricultural workers.
KEYWORDS: public sector, private sector, wages, employment.
JEL: E24, J31, J45, L32.
Kalsoom Zulfiqar, Abdul Rehman Nawaz, Madiha Qayyum, Faisal Asghar
This study examines the role of foreign aid and governance in Pakistan’s human
development from 1991 to 2021 utilizing the autoregressive distributed lag (ARDL) technique. It not only explores the individual impact of foreign aid and governance but also
investigates how good governance affects human development. A governance indicator has
been constructed by employing Principal Component Analysis based on six different governance dimensions. It is found that both good governance and foreign aid have significant
and positive relationships with human development in Pakistan and good governance facilitates and reinforces the contribution of foreign aid in advancing human development.
The results show that trade openness, income growth, and government expenditure also
have a positive impact on human development. The Granger Causality test further verifies
the causality running from foreign aid and governance to human development. The analysis
implies that enhancing governance quality is important to optimizing the positive impact of
foreign aid on human development. Likewise, policies to stimulate trade openness, boost
government expenditure on social sectors, and more consistent income growth can play an
important role in improving human development in Pakistan.
KEYWORDS: Aid, Governance, Development.
JEL: F35, O1, D73.
An Empirical Analysis of the Prices of Selected Food Items Across Three Political administrations in Pakistan
Nehal Ahmad Khan, Anwar Shah
This study compares the prices of selected food items across three political administrations in Pakistan. We have taken monthly data from July 2008 to October 2021 of the
prices of selected food items from the Pakistan Bureau of Statistics, the Ministry of Finance
(Pakistan)’s Pakistan Economic Survey, and Index Mundi. Thirteen food items were selected: Wheat, Basmati Rice, Basmati Super Rice, Basmati Broken Rice, Sindh/Punjab Rice,
Tinned Vegetable Ghee, Loose Vegetable Ghee, Whole Masoor Pulse, Washed Masoor
Pulse, Washed Mong Pulse, Washed Mash Pulse, Gram Pulse and Refined Sugar. We theorize that an increase in prices will be independent of changes in political administration, as
prices are determined purely based on economic factors in the market. We provide graphical and regression analysis, with our study pointing to a consecutive rise in the absolute
price of selected food items across all three administrations. Increasing real prices of selected
food items are specific to each administration.
KEYWORDS: Political administration, selected food items, nominal prices, real prices, food inflation, ARDL model.
JEL: Q11, L66, N70.
Suadat Hussain Wani, M. Afzal Mir
This study aims at identifying the main determinants of the annual trade flows of
Pakistan with its top trade partners, including those with which the country has signed
trade agreements. Given the present economic conditions of the country, it is important to
identify the main determinants of trade so that the country can benefit from trade openness
around the world. In addition to identifying trade determinants, the impact of adherence to
a particular trade agreement was also examined. The results indicate that FTA signed by
Pakistan with China and other trade partners has created trade opportunities for
participating countries, highlighting the importance of trade liberalization for the long-run
development of the country. Besides, the trade potential of Pakistan with selected trade
partners has also been estimated.
KEYWORDS: Pakistan, gravity model, panel data, total trade, trade potential.
JEL: C23, P45, F10.
Wajid Islam, Junaid Ahmed, Amjad Masood
This study examines the trade potential of Pakistan with the countries of the
Gulf Cooperation Council (GCC). Trade potential is estimated using the RCA (Revealed
Comparative Advantage) index technique, utilizing HS-8 tariff line level data from 2007
to 2021. Our findings identify 102 products at the tariff line where Pakistan enjoys a
comparative advantage. These products span various sectors, including copper, iron,
steel, minerals, wood, pharmaceutical, paper, tobacco, sugar, and plastic. Furthermore,
the paper discusses the trade hindering effect of factors such as the absence of effective
trade agreements, shortage and high energy prices, and other high input costs.
KEYWORDS: Trade potential, Pakistan, Gulf Cooperation Council, HS-8, revealed comparative advantage.
JEL: F10, C61.
Iffat Ara and Qazi Masood Ahmed
Published:Jan - June 2022
In Pakistan, essential food items are exempted from indirect taxes to avoid any
subsequent increase in their prices, with the goal of protecting the poor from a regressive
tax burden. Taxes on inputs such as on fuel and energy, however, are transferred to
consumer prices and, due to cascading effects, can exert a burden on households. This
study investigates the incidence of indirect taxes on essential and nonessential food
items across households in Pakistan. To do so, we follow an input‒output multiplier-
based approach that allows the measurement of the cascading effect of taxes. It employs
the latest available edition of the Household Integrated Economic Survey (HIES) 2018-
19 in order to observe household food expenditures. Our analysis establishes that there
is an effective tax even on items that are ostensibly tax-exempt, implying that households
pay taxes indirectly even on those items. The incidence of these indirect taxes on essential
food items is regressive across all household deciles and the incidence of indirect taxes
on nonessential items is progressive at high expenditure deciles but proportional in the
lower-ranking expenditure deciles.
KEYWORDS: Tax Incidence, Distribution of Tax Burden, Tax Burden, Indirect Taxes, Pattern of Incidence, Pakistan.
JEL: E31, H22, H23.
Muhammad Zeeshan Younas
Published:Jan - June 2022
The prime objective of this study is to examine how agglomeration affects the
productivity of firms by location. Using different spatial econometrics on geo-referenced
data of textile manufacturers in Pakistan, the study confirmed the presence of spatial
autocorrelation in firm productivity. Results show that highly productive textile firms
appear to be clustered in the regions of Lahore and Faisalabad, while low productivity
textile firms appear to be clustered in Karachi and the Federal areas of Pakistan.
Although the spread of clusters varies a bit with the use of different weight matrices,
similar hotspots and cold spot patterns are observable. Furthermore, spatial error and
spatial lag models find that younger textile firms tend to be more productive than older
ones and firm size, exports, quality assurance certifications, and R&D spending are the
key spatial correlates of textile firm productivity.
KEYWORDS: Firm Productivity, Agglomeration, Spatial Analysis, Textile, Pakistan.
JEL: D22, D24, L25.
Syed Ateeb Akhter Shah, Fatima Kaneez and Arshad Riffat
Published:Jan - June 2022
This paper investigates whether consumer confidence improves the prediction
of GDP growth over what are popularly construed as fundamental economic variables.
We use monthly data concerning Consumer Confidence Index (CCI) and its sub-indices
to forecast GDP growth for Pakistan. Employing a set of univariate and multivariate
models and comparing their forecasting performance against the Naïve mean model, we
find that adding the consumer sentiments with fundamental economic variables
improves the forecast of GDP growth. Vector autoregressive model with current
economic conditions index and economic fundamentals, we find, performs the best. The
results have potential policy implications in terms of tackling unemployment and
inflation, for economic growth stimulation.
KEYWORDS: Consumer Confidence Index, Forecasting, GDP growth, AR, ARMA, VAR.
JEL: C53, E17, C32, D12.
Mazhar Hussain and Syed Zulfiqar Ali Shah
Published:Jan - June 2022
The objective of this article is to evaluate the impact of Pakistan-Sri Lanka Free
Trade Agreement (FTA) on Pakistan's and Sri Lanka's macroeconomic structures. The
FTA is operational since June 2005. For this purpose, the Computable General
Equilibrium (CGE) Model has been used and simulations have been conducted by using
the Global Trade Analysis Project (GTAP) model, which measures the effect of FTA on
Pakistan. The GTAP is a General Equilibrium modeling structure of the multiple
economies. The finding of this study reflects that Pakistan has positive impact on real
GDP, trade and welfare, while Sri Lanka has negative impact on the same factors.
Moreover, the results of this study are coherent with the international trade theories.
This research assists the trade policy makers to adopt appropriate policies for future
FTAs with South Asian economies to obtain more gains for Pakistan.
KEYWORDS: Pakistan, Sri Lanka, FTA, General Equilibrium, GTAP.
Ali Amin, Rizwan Ali and Ramiz ur Rehman
Published:Jan - June 2022
Our study enriches the growing literature on cost stickiness in the context of an
emerging economy. The study examines the relationship between cost stickiness and
dividend payout behavior in Pakistan, and the possibility of their being a moderating role of
family ownership. Empirically, we employed 4,567 firm-year observations of non-financial
firms listed on the Pakistan Stock Exchange, over the period 2006-2021, and used ordinary
least squares regression method to test our hypotheses. Additionally, we used generalized
method of moments techniques (GMM) to test the robustness of our results. Using the lens
of agency theory, we find that cost stickiness is associated with higher dividend payouts.
Further, family ownership moderates the relationship between cost stickiness and dividend
payout. Overall, our results support cost stickiness in our sample of firms and a positive
correlation of family ownership with dividend payout.
KEYWORDS: Cost stickiness, dividend payout, agency theory.