This paper has analyzed the incidence of government expenditures on health and education by using the benefit incidence approach. Recent household level data from the Pakistan Standards of Living Measures (PSLM) has been used to calculate the incidence for Pakistan overall, and at provincial and regional levels, of different education and health services. GINI and concentration coefficients have been used to measure the benefit inequalities of public expenditure. The results demonstrate that education expenditures are progressive in overall Pakistan. The progressiveness hypothesis regarding health expenditure is accepted partially, as the expenditure is progressive for Pakistan overall, but regressive at regional and provincial level of services. Efforts should be directed towards the horizontal and vertical equity in the allocation of resources both at the provincial and regional levels, and greater targeting of rural and low-income groups can make the expenditure programs more effective and result oriented.
KEYWORDS: Benefit Incidence, Health, Education, and Pakistan.
JEL: N/A.

Education is one of the most important factors in human development. The data from two household surveys were used to estimate the returns to education and gender disparities in wages in Pakistan. The model, an extension of Becker and Mincer models, was used to quantify the returns to investment in education. The results revealed that income gaps attributable to education level were significant. Income gaps between educated and uneducated workers in first-time employment also tend to increase with experience. Women earn significantly less than their male counterparts. These differences may be interpreted as the maximum possible effect of discrimination against women. Women also earn less because they acquire less cumulative work experience than men, as a result of breaks in their work histories, owning to the demand of motherhood and domestic chores. Education quality was much lower for students from poor families; the majority of these poor attended public school and did not have access to better quality private schools. Such differences strengthened the influence of the distribution of education and the structure of returns on income concentration.
KEYWORDS: Earnings function, gender inequality, human capital.
JEL: N/A.

The value of rainfall forecasts for rainfed rice production in the Philippines is estimated under the assumption that farmers adjust the quantities of fertilizer and labor if rainfall forecasts are available. Using a panel of 46 rice farmers in Tarlac, Philippines, a heteroskedastic production function with growing season rainfall (July to October) as one of the independent variables is estimated. The expected value of rainfall forecasts under the assumption of simultaneous adjustments in both fertilizer and labor was estimated to be slightly more than 1% of the net return from rice production. Taking the rainfed rice area in the Philippines of 1.2 million ha and a net return of $446/ha, the total value of the forecast was estimated to be $6.6 million per year. The expected value was also estimated under the assumption that, instead of forecasts of rainfall amounts for each year, forecasts made are for rainfall “above average”, “average”, or “below average”. The value of rainfall forecasts was found to be highest and ranged between 1.4%-4.5% of the net return when the forecast is ‘above average’. The Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) could help farmers by investing more of its resource for the accurate prediction of ‘above average’ rainfall events.
KEYWORDS: The Philippines, rainfall, forecast, heteroskedastic, prediction.
JEL: N/A.

The study employs the Girton and Roper (1977) measure of exchange market pressure (defined as the sum of exchange rate depreciation and foreign reserves outflow), to examine the interaction between exchange market pressure and monetary variables, viz. domestic credit (Reserve Money) and the interest rate. Evidence from impulse response functions suggests that domestic credit has remained the dominant tool of monetary policy for managing exchange market pressure. The increase in domestic credit upon increases in exchange market pressure (during 1991-98) was imprudent. The results suggest that fiscal needs/growth objectives might have dominated external account considerations during this period. Post 9/11 there is evidence of sterilized intervention in the forex market. The interest rate has also weakly served as the tool of monetary policy during the hay days of foreign currency deposits (1991-98). The finding implies that, for the interest rate to work as tool of monetary policy vis-a-vis exchange market pressure, a reasonable degree of capital mobility is called for.
KEYWORDS: Pakistan, Exchange Market, Pressure, Monetary Policy, State Bank, SBP.
JEL: N/A.

In this paper we compare the performance of different GARCH models such as GARCH, EGARCH, GJR and APARCH models, to characterize and forecast financial time series volatility in Pakistan. The comparison is carried out by comparing symmetric and asymmetric GARCH models with normal and fat-tailed distributions for the innovations, over short and long forecast horizons. The forecasts are evaluated according to a set of statistical loss functions. Daily data on the Karachi Stock Exchange (KSE) 100 index are analyzed. The empirical results demonstrate that the use of asymmetry in the GARCH models and the assumption of fat-tail distributions for the innovations improve the volatility forecasts. Overall, EGARCH fits the best while the GJR model, with both normal and non-normal innovations, seems to provide superior forecasting ability over short and long horizons.
KEYWORDS: APARCH; EGARCH; Fat-tailed distribution; Forecast; Forecast horizon; GARCH; GJR; KSE 100; Volatility.
JEL: N/A.

Anwar, Mumtaz, The Political Economy of Foreign Aid to Pakistan, Nomos Verlagsgesellscharft, Baden-Baden, 2007, pp. 141, Price not mentioned. There are an increasing number of studies that analyze the discrepancies between the stated and the actual motives behind giving aid to developing economies. Given this divergence the subsequent effectiveness of aid is also questioned, paving way for debates on whether aid should be given at all. An analysis of the former question of motives is imperative to understand whether aid will have a positive impact on economies with weak institutions, political instability and economic decision-making backed by the need to preserve the status quo.
KEYWORDS: Book review, Pakistan, Political economy, foreign aid.
JEL: N/A.

The Lahore School’s Third Annual Conference on the Management of the Pakistan Economy, in May 2007, reflected on the economic reforms that have been implemented since the 1990s and on the prospects for additional reforms in both the near and long-term. A number of respected economists and other experts provided evaluations of the government’s past efforts, and offered advice on the direction that future reform efforts should take. The Conference focused on a few key areas which included Governance Reforms, Industrial Competitiveness, Monetary, Fiscal and Financial Sector Policies, Exchange Rate and Trade Policies, and Female Labor Force Participation. The key findings of the papers were as follows:
KEYWORDS: Pakistan, Lahore School, third, annual conference, Pakistan economy, management.
JEL: N/A.

Though government reforms are viewed as important for most developing countries, the rationale for these reforms must be clearly understood if they are to be correctly designed and implemented. From an international perspective, government reforms in Pakistan must be developed to integrate Pakistan into a larger global economy and should be based on the lessons learned from other developing countries. From the domestic perspective, reforms are necessary for the Pakistani government to adapt to the changing domestic environment. The reforms must focus broadly on the Federal, Provincial and District governments, on civil service reform and on business process re-engineering. This paper details the rationale for government reform in Pakistan, focuses on critical areas of reform, and provides a framework for the proposed reform approach.
KEYWORDS: Pakistan, government reform, long term vision.
JEL: N/A.

Though Pakistan’s exports have increased significantly, analyses have shown that Pakistan’s industrial competitiveness is limited to a narrow range of products. This paper looks at the factors affecting Pakistan’s competitiveness ranking and relates these various factors to trends in Pakistan’s total factor productivity. In addition to looking at the components of Pakistan’s competitiveness ranking, this paper details the steps required for Pakistan to increase its global industrial competitiveness.
KEYWORDS: Pakistan, industrial, competition, exports, strategy, competitiveness.
JEL: N/A.