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Competitiveness of Pakistani Fruits in the World Market
Waqar Akhtar, M. Sharif and Hassnain Shah
Published:July - Dec 2009
This paper examines the global competitiveness of Pakistan’s fruit exports (dates, mangoes, and oranges), using revealed comparative advantage (RCA). It also analyzes domestic consumption trends among selected fruits grown by major exporters. Our results indicate that Pakistan has a comparative advantage in fruit exports. Comparing the movement in comparative advantage indices for Pakistan with those of its main exporters/competitors demonstrates that Pakistan has a relatively high comparative and competitive advantage in the production of dates and mangoes. The increasing trend of competitiveness in Pakistan indicates that there is potential for higher growth; given that fruit exports are a potential source of higher exports earnings, there is a need to strengthen competitiveness in this sector.
KEYWORDS:
Comparative advantage,
competitiveness,
exports,
growth.
JEL:
F14,
Q18,
Q17.
Income Tax Revenue as an Indicator of Regional Development in Pakistan
Ijaz Hussain and Sumbal Rana
Published:July - Dec 2009
The objective of this paper is to highlight the use of income tax revenue as an indicator of regional development in Pakistan. Initially, we identify a dramatic shift in income tax revenue trends at the provincial level for the period 1992/93 to 2005/06. We develop a simple model of income tax revenue and estimate the relationship between growth of income tax revenue and gross regional product (GRP). Based on the estimated relationship, Punjab appears to have been the fastest growing province during the 1990s, while Sindh shows the greatest level of dynamism in the current decade. This is attributed to high growth rates, especially in large-scale manufacturing during the period, which has a larger sectoral share in Sindh’s economy.
KEYWORDS:
Income tax,
development,
revenue.
JEL:
R11,
H20.
Published:Sept 2009
In April 2009, the Centre for Research in Economics and Business (CREB) of the Lahore School of Economics hosted the Fifth Annual Conference on the Management of the Pakistan Economy on the theme, “Growth, Trade and Development.” The Centre’s Director, Naved Hamid, invited a number of prominent speakers including academics, economists, current and former government officials, and other experts to present a combination of research and policy papers, which can be broadly grouped under two major headings: i) Pakistan’s Growth and ii) Trade and Development in Pakistan. These topics were selected because of their timeliness, given the increasing macroeconomic pressures facing the country, in particular those arising from the exchange rate and inflation, and the impacts on poverty that could result. The papers presented at the conference are summarized below:
KEYWORDS:
management,
Pakistan,
Lahore School,
Annual Conference,
Pakistan economy,
CREB,
fifth.
JEL:
N/A.
Total Factor Productivity Growth in Pakistan: An Analysis of the Agricultural and Manufacturing Sectors
Azam Amjad Chaudhry
Published:Sept 20009
This paper uses Cobb-Douglas and translog production functions to calculate total factor productivity (TFP) in Pakistan over the period 1985 – 2005, first for the manufacturing and agricultural sectors individually, then for the economy as a whole. In manufacturing, productivity increased at an average of 2.4% per year with output growth being driven mainly by increases in capital. Despite the limitations of the available agricultural data, we have determined that productivity has grown at an average rate of 1.75% per year in this sector. The major drivers of growth in agriculture have been increases in labor and TFP. These estimates of sectoral TFP put Pakistan at par or above average as compared to other developing countries, but lagging behind the East Asian economies. For the economy as a whole, TFP has increased at an average rate of only 1.1% a year in Pakistan, resulting in almost three quarters of GDP growth attributed to increases in labor and the capital stock.
KEYWORDS:
Growth,
labour,
capital,
total factor productivity.
JEL:
D24,
E0,
F4.
Microeconomic Flexibility in India and Pakistan: Employment Adjustment at the Firm Level
Theresa Chaudhry
Published:Sept 2009
In this paper, we look at the pace at which firms adjust their employment levels as a measure of “microeconomic flexibility.” Flexibility aids in creative destruction processes, where less efficient establishments recede and dynamic firms can rapidly expand. Following the techniques used by Caballero, Engel, and Micco (2004), we use firm-level data from India and Pakistan to estimate the proportion of the gap closed in a year between desired and actual employment. The results for the proportion of the gap closed for India were 0.46 in 2001 and 0.45 in 2000. For Pakistan, we estimated the proportion of the gap closed as 0.2 in 2001 and 0.53 in 2000. The results for 2001 were much lower than expected (and lower than previous estimates for both countries), possibly due to the events of 9/11. Pakistan compared favorably to India in various key sectors, including chemicals, food processing, and garments. Exporters did not seem to have a quicker speed of adjustment.
KEYWORDS:
Costs,
efficiency,
flexibility,
inputs,
labor.
JEL:
E2,
J2,
J6.
The Political Economy of Industrial Development in Pakistan: A Long-Term Perspective
Imran Ali and Adeel Malik
Published:Sept 2009
Private industrial development in Pakistan has a mixed track record. This paper presents a political economy overview of industrial development in Pakistan. Starting with an analysis of initial conditions, such as low levels of urbanization and out-migration of bourgeoisie, the paper looks at the ways in which policies were used to create advantages for elites and special interests. The paper also investigates the role of foreign aid in distorting industrial structure.
KEYWORDS:
Development,
industrial policy,
Pakistan.
JEL:
F14,
F19.
Capital Flows and Real Exchange Rate Overvaluation - A Chronic Ailment: Evidence from Pakistan
Hamna Ahmed
Published:Sept 2009
The objective of this study is twofold: (i) to estimate the equilibrium real exchange rate (RER) from a long-run perspective and calculate the degree of overvaluation for the period 1972–2007, and (ii) to test the Dutch Disease hypothesis concerning the effect of capital flows on the RER in Pakistan. Based on various macroeconomic fundamentals suggested in economic literature by Edwards (1988, 1989, 1994), Elbadawi (1994), and Montiel (1997), the equilibrium RER is estimated as a function of the terms of trade, government spending, degree of openness, workers’ remittances, foreign direct investment (FDI) flows, and foreign economic assistance. In view of this study’s long-term focus, all unsustainable and temporary flows are filtered out to obtain an accurate misalignment index. Estimation results are in line with theoretical postulations: an increase in capital flows, government spending on nontradable goods and terms of trade improvement are consistent with an appreciation of the RER, while an increase in the degree of openness is expected to depreciate the RER. Findings suggest that the RER suffers from chronic overvaluation in Pakistan. In spite of filtering out unsustainable and temporary flows, overvaluation increased from 0.75% in 2001 to 22.9% in 2007. A sharp rise in FDI flows (between 2005 and 2007) and an increase in remittances (between 2002 and 2007) are among the main factors that have contributed to this persistent overvaluation. Results also suggest that the Dutch Disease hypothesis holds in the case of Pakistan.
KEYWORDS:
Real exchange rate,
capital inflow,
overvaluation,
Pakistan.
JEL:
E22,
F10,
G00.
Recent Experience and Future Prospects of Pakistan’s Trade with China
Musleh-ud Din, Ejaz Ghani and Usman Qadir
Published:Sept 2009
This paper examines the prospects of expanding bilateral trade between Pakistan and China particularly in the context of the recently signed free trade agreement between the two countries. Using the augmented gravity model in the tradition of Rose (2004), the paper shows that there is significant potential for the expansion of bilateral trade between the two countries as a result of the free trade agreement. The paper also analyzes bilateral trade flows between the two countries in terms of a trade specialization index and the Grubel-Lloyd index of intra-industry trade. We show that bilateral trade between the two countries is heavily tilted in favor of China and that this situation may persist in the short term.
KEYWORDS:
Pakistan, China, FTA, Pak-China, trade patterns, export diversification.
JEL:
040,
F10,
E23.
The Rise of Bilateralism in Trade and its Implications for Pakistan
Irfan ul Haque
Published:Sept 2009
This paper examines and critiques the worldwide mushrooming of preferential trading arrangements and traces its implications for Pakistan. It points out that this development is fundamentally contrary to the principle of most-favored-nation (MFN) treatment, which was the cornerstone of the post-war multilateral trading system as embodied in the General Agreement on Tariffs and Trade (GATT) and by the World Trade Organization (WTO). The causes of the rise in bilateral and regional trading arrangements are discussed and it is shown that they pose a real threat to many relatively small economies, including Pakistan. The paper discusses the various preferential trade agreements Pakistan has already signed. It notes that, with the exception of its trade agreement with China, Pakistan has not succeeded in concluding preferential trading arrangements with any of the strategically and systemically more important countries, viz., the US, European Union, and Gulf Cooperation Council (GCC). The South Asia Free Trade Area (SAFTA) could potentially be of considerable importance for Pakistan’s long-term economic growth, but this potential might not be realized if India and Pakistan fail to overcome their mutual differences. Finally, the paper explores steps that might be taken to promote Pakistan’s economic interests in its bilateral relations. It points out that, apart from achieving a measure of macroeconomic stability, Pakistan needs to improve its international competitiveness through productivity improvements and be more strategic in its trading relations. Its market access to leading industrial countries that are entering free trade agreements (FTAs) with Pakistan’s competitors is a real threat and remedial actions are required.
KEYWORDS:
Trade, Pakistan, growth.
JEL:
F13,
P45.
International Trade Arising from Wage Differences
Sikander Rahim
Published:Sept 2009
This paper analyzes how trade can develop between low and high wage countries when there is free trade and when there is protection. In particular, the paper focuses on Pakistani industrial development from the 1950’s and how standard international trade theory relies on specific assumptions about the nature of capital, which may not hold. This, in turn, has specific implications for industrial policy in low wage countries.
KEYWORDS:
International trade, investment, comparative advantage.
JEL:
F19,
J00,
J39.