This study empirically investigates the effect of surplus education on the earnings distribution in Pakistan using quantile regression. The method of realized matches is used to measure the required level of education in each occupation from the Pakistan Social and Living Standards Measurement (PSLM) 2013-14 survey data. There is heterogeneity in returns to surplus education among overeducated workers. These returns are higher for workers at the upper half as compared to the lower half of the earnings distribution. Surplus education earns positive returns but less than the returns associated with the level of education required for jobs. Further, the difference in returns among the overeducated is higher than the difference in returns among workers who have the required education for the job. The findings imply that the surplus education factor is significant in explaining how education contributes in earnings differentials and inequality.
KEYWORDS: Surplus education, earning inequality, labor markets, Pakistan.
JEL: I24, J31.

In the context of a high prevalence of both poverty among households and business failures among firms in the majority of Sub-Saharan African (SSA) countries, competition is seen as one of the viable tools for transforming and improving these economies. This can be achieved by boosting productivity, improving output markets, increasing innovation and promoting economic growth. This study examines the sources of market power among firms within a variety of institutional settings using a large sample of data from 23 SSA countries. Tobit panel models comprising both fixed and random effects are used to estimate the determinants of market power. The study reveals that a large number of firms control less than 5 percent of the market with a few firms controlling between 5 and 34 percent of the market. At the same time, there are a small number of firms controlling between 30 and 100 percent of the markets in Sub-Saharan Africa. The findings further show that economic and political institutions significantly matter in the determination of power among firms in SSA. However, the influence of institutions varies significantly depending on the type of institutions and regional differences.
KEYWORDS: Competition, institutions, firm, market power.
JEL: D41, K20, L22, L41, O55.

To counter the severe trade deficit problem that Pakistan faces, we explain how to move up the value chain of exports by reducing tariff rates on the intermediate inputs used by local manufacturers. The availability of cheaper intermediate inputs through tariff reductions can substantially reduce input constraints. We begin by identifying trends in the tariff rates imposed on intermediate inputs, and their imports over time by Pakistan and its counterparts. Using an instrumental variable approach, we measure the gains that can be achieved by importing more of these intermediate inputs in terms of export performance indicators. We emphasize that input tariff reductions could help Pakistan expand exports. We also identify specific sectors in which intermediate input tariff reductions could have significant gains for Pakistan in terms of export growth. We recommend the need to reduce intermediate input tariffs in these sectors only, rather than general tariff reductions across all sectors.
KEYWORDS: tariffs, Pakistan.
JEL: F13.

This article illustrates the dynamics of and tradeoff between inflation and output in Pakistan by utilizing data on 18 major trading partners in a cointegration analysis. In doing so, we use key features of the global vector autoregressive approach to construct a model that captures foreign-specific variables related to Pakistan; these are analyzed empirically along with domestic data for the period 1972–2014. Our findings show that, after accounting for the impact of increasing interdependencies, trade spillovers and changing global macroeconomic conditions, a long-run equilibrium relationship exists between domestic inflation and output. The foreign variables have a significant impact on the key domestic variables. In particular, domestic inflation and trade openness, foreign inflation and world oil prices have significant explanatory power for Pakistani output. Policymakers in Pakistan should therefore account for global developments, specifically in trading partner economies
KEYWORDS: Pakistan, cointegration, cross-country spillovers, inflation-output dynamics, oil prices.
JEL: E31, E52, O47.

This study empirically investigates the aid effectiveness debate in light of the Burnside-Dollar (2000) hypothesis that the recipient country’s policy environment is critical for aid effectiveness. Based on data from ten Asian countries for 1984–2015 and in line with Burnside and Dollar (2000), we construct a new composite policy index. Employing two-stage least squares to estimate the model, we find that aid had a negative impact on economic growth during the study period for these countries, thus refuting the Burnside-Dollar aid effectiveness hypothesis.
KEYWORDS: foreign aid, macroeconomic policy, economic growth, Burnside-Dollar hypothesis, Asia.
JEL: 040, P45.

The evolution of money has accompanied the development of civilizations and technological innovations, leading to today’s cryptocurrencies. Cryptocurrencies have become a popular mode of payment globally because of their low cost, high-speed transferability and a decentralized tracking network that provides secure transactions and a high degree of anonymity. However, the decentralized system of cryptocurrencies has made global monetary systems more dynamic and therefore more prone to misuse as well as posing a threat to financial stability. Cryptocurrencies are also gaining popularity in Pakistan: its first cryptocurrency, named ‘Pakcoin’, was launched in 2015. The State Bank of Pakistan does not recognize any digital currency, and the Federal Board of Revenue and Federal Investigation Agency have taken legal action against local and internationally traded cryptocurrencies. This article reviews these risks and provides various regulatory solutions so that methods can be developed to improve the management of financial innovations and create a safer environment in which financial innovation can continue. Furthermore, developing countries such as Pakistan can take advantage of distributed ledger technology (used in cryptocurrencies) in applications including: microfinance to help the unbanked, in data identification systems and in land registries to help enforce property rights.
KEYWORDS: cryptocurrency, blockchain, regulation, Pakistan.
JEL: G19.

This study analyzes the impact of education, experience, and social capital on firm survival using two waves of a survey conducted in 2008 and 2017 for the electrical fittings cluster based in Sargodha, Pakistan. Estimating a probit model, we find that the entrepreneur’s education, experience, and social network are each positively correlated with firm survival. The interactions of education with both production and marketing experience are also significantly and positively related to firm survival while interactions of social capital with experience are not. Therefore, for the firms in this sector, education plays an important role directly as well as through production and marketing experience.
KEYWORDS: Education, experience, social capital, firm survival, Pakistan.
JEL: J24, L26, L69.

This study analyzes the impact of energy pricing policies on consumers’ welfare in rural and urban Pakistan. The study is based on pooled data from the Household Integrated Economic Survey for the period 1984/85 to 2011/12. We use the Almost Ideal Demand System to estimate parameters and price elasticities. The welfare analysis suggests that the rise in energy prices has been greater than the rise in the general consumer price index over this period. Therefore, consumers have incurred high expenditures in all years from 1984 to 2012, with a consistent welfare loss for all consumers with a decreasing trend. Additionally, the welfare loss to rural consumers is greater than that to urban consumers.
KEYWORDS: welfare, Pakistan, energy pricing, almost ideal demand system.
JEL: Q41, C1, D60.

This paper presents panel data estimates of the relationship between governance, aggregate labor productivity (ALP) growth and total factor productivity (TFP) growth for 12 Asian economies between 1996 and 2013. Our results show that government effectiveness has a positive and significant effect on ALP in both levels and first differences. Regulatory quality has a positive impact on ALP only in first difference. Although both government effectiveness and regulatory quality have a positive effect on TFP growth in first difference, only political stability is significant and positive in the levels specification. Other findings indicate that physical capital and human capital have a positive effect on ALP growth. We also find evidence of positive spillover effects with respect to human capital. The positive association between governance, economic growth and productivity provide a better understanding of the role of governance in enhancing economic performance. Our findings have policy implications for ways to achieve good governance to enhance economic growth and productivity.
KEYWORDS: total factor productivity, economic growth, governance.
JEL: D24, E24, C23, O40.

This paper studies the impact of inventory-intensity, marketing-intensity and firm size on the markups of exporting firms. We used audited financial statement data of publicly listed companies in the spinning, weaving and finishing industry within the textiles sector of Pakistan. We document five observations: 1) average markup of exporters is relatively higher than non-exporters; 2) there is higher dispersion in markups of non-exporters relative to exporters; 3) large firms have relatively higher markup and marketing-intensity; 4) firms which have higher marketing- and inventory-intensity also have higher markups; and 5) exporters have relatively higher markup elasticity with respect to marketing-intensity, inventory-intensity and growth in inventory-intensity.
KEYWORDS: Markups, inventory intensity, marketing intensity, firm size, Pakistan.
JEL: F14, L11, L25.