As economic activity becomes increasingly knowledge based, disparities in educational opportunity play a more important role in determining the distribution of income and poverty. A greater equity in the distribution of educational opportunities enables the poor to capture a larger share of the benefits of economic growth, and in turn contributes to higher growth rates. In contrast, large-scale exclusion from educational opportunities results in lower economic growth and persistent income inequality. This research appraises education inequalities in Pakistan at the district level. To summarize district performance in terms of education, a District Education Index (DEI) is prepared. Further, it explores the socioeconomic inequalities in education by linking DEI with the level of district economic development.
KEYWORDS: Pakistan, education inequality.

JEL: N/A.

In third world countries, where the level of mechanization in agriculture is low, livestock rearing is mainly for draught purpose. On the other hand, the use of animals for draught purpose is low in developed countries owing to the high level of farm mechanization and the animals are mainly reared for the consumption of meat and milk. Milk production in Pakistan is an important enterprise for over five million households owning buffaloes and cattle. Supply response of livestock has been undertaken mostly in developed countries. In developing countries livestock farming is not done on a large scale basis. This study is an attempt to obtain the best estimates of the response of milk producers while making a decision about production allocation of milk in Pakistan. The main objectives of the study are: (1) to test whether Pakistani milk producers respond to price movements (2) to estimate the elasticities of production with respect to milk producers: (a) relative price (b) credit and lagged production (c) to make a comparison of short-run and long-run price elasticities with that of developed and underdeveloped countries (d) to identify policy measures. The study is based on secondary data at the Pakistan level and covers a period of 31 years, starting from 1971-72 to 2002-03. Marc Nerlove’s (1958) partial adjustment lagged model is used for the study. The result of the analysis reveals that in the process of making the production decisions for milk production, all the variables (relative price, credit availability and lagged milk production) are equally important
KEYWORDS: Pakistan, milk production, dairy, farm mechanization, lagged milk production.

JEL: Q11.

The development of financial equilibrium asset pricing models has been the most important area of research in modern financial theory. These models are extensively tested for developed markets. This paper examines the validity of the Arbitrage Pricing Theory (APT) model on returns from 24 actively trading stocks in Karachi Stock Exchange using monthly data from January 1997 to December 2003. Explanatory factor analysis approach indicates two factors governing stock return. Pre-specified macro economic approach identifies these two factors as the anticipated and unanticipated inflation and market index and dividend yield. Some evidence of instability is found. The overall finding of two significant priced factors at least for a sub period supports APT for an emerging capital market.
KEYWORDS: Financial equilibrium models, capital asset pricing model, arbitrage pricing theory.

JEL: N/A.

In the paper we have estimated elasticities of employment with respect to the expansionary factors. According to our finding, in the small scale manufacturing sector size of employment is negatively related with wage elasticity, positively related with capital elasticity and also positively related with value of product elasticity.
KEYWORDS: Employment elasticities, Pakistan, small-scale manufacturing.

JEL: N/A.

Shahrukh Rafi Khan, Pakistan Under Musharraf (1999-2002): Economic Reform and Political Change, Vanguard Books, Lahore. Pages 178. Price: Pak Rs. 495/-. Dedicated to Omar Asghar Khan, this book can be seen as a continuation of the author’s previous Reforming Pakistan’s Political Economy, published by Vanguard in 1999. Using findings from research done by the Sustainable Development Policy Institute (SDPI), when the author was its Executive Director, Shahrukh Rafi Khan takes us through the political and economic reforms undertaken by the present military government.
KEYWORDS: Pakistan, Musharraf, political economy, reform.

JEL: N/A.

The theory of human capital posits a significant and positive relationship between earnings and work experience. This theory assumes a continuous increase in wages with employment experience at different levels of schooling. Several studies have established that earnings rise rapidly as the level of educational attainment improves. Similarly increase in work experience adds to skills, makes an individual more productive and hence leads to higher earnings. Education provides not only an initial labour market advantage, but also cumulative benefits over the working life. Therefore, it is misleading to assume a uniform rate of return to experience at different levels of education.
KEYWORDS: Human capital, education, higher returns, interaction on earnings.

JEL: N/A.

This article aims at identifying the macroeconomic indicators that account for the Argentine financial crisis. For this purpose, an early warning system (EWS) is built based on a probit model that incorporates six monthly variables spanning the time period between February 1991 and February 2000. The results indicate that the significant indicators are the consumer price index and the ratio of the value of exports to the value of imports. Results further indicate that the predictive power of the model is quite reasonable with a correct prediction probability of 67 percent at 15 percent cutoff level.
KEYWORDS: Argentina, financial crises, early warning systems, EWS, multinomial probit model.

JEL: N/A.

In this paper we attempt to assess the relevance of correspondence principle in determining the possible effects of currency devaluation on balance of payments and employment. We developed a model in line with Buffie (1986) who derived a very strong result that if the model is locally stable and if labour and imported inputs are gross substitutes then devaluation will certainly improve labour employment and balance of payments at the same time. For the general production function the Buffie model predicts that devaluation cannot contract both employment and balance of payments at the same time since either of them is incompatible with the stability of the model. Buffie results by and large depend upon stability conditions of the model and what we have demonstrated that stability analysis of the model unfortunately is not free of error. In the corrected model we observe that the results derived by Buffie do not hold in general.
KEYWORDS: Correspondence principle, balance of payments, employment, labour employment, devaluation.

JEL: N/A.

The role of savings in investment and therefore in the development of a country cannot be exaggerated. In poor countries like ours most of the savings is done by households. In this paper the saving behaviour of Pakistan households, broken down to rural-urban, is examined. Using HIES 1998/99 and utilising OLS, it has been shown that saving behaviour in Pakistan is influenced by various factors including wealth, employment status, education, age and dependency ratio. But the most import role in influencing saving behaviour is played by household income.
KEYWORDS: Pakistan, development, household income, OLS, saving behaviour.

JEL: N/A.

This study focuses on the measurement of the underground economy (UGE) through tax evasion in Pakistan over the time period 1974-2002. The monetary approach is applied in order to estimate the underground economy. First, the currency demand equation is estimated and then an attempt is made to deduce the size of the underground economy and tax evasion. Finally, an Ordinary Least Square (OLS) Model is applied in order to estimate the impact of the underground economy on Gross Domestic Product of Pakistan for a selected time period. The results demonstrated that the underground economy has increased enormously from Rs. 12 billion in 1974 to Rs. 1085 billion in 2002. The findings suggest that the existence of such a large UGE can decrease tax revenues, depress GDP, and raise socio-economic problems. Frequent tax audits and heavier penalties for tax evasion may minimise the size of the underground economy with its ill effects.
KEYWORDS: Pakistan, informal economy, underground economy, tax, tax evasion, tax rates.

JEL: N/A.

This paper applies the technique of Granger Causality to determine the relationship between total government expenditures and total tax revenue using annual revised estimates. The analysis discovers a firm unidirectional effect from expenditure to revenue suggesting the preference of controlling the spending decisions to reduce the tax revenue-expenditure deficit.
KEYWORDS: Pakistan, Granger Causality, estimates,  tax revenue-expenditure deficit.

JEL: N/A.

Pakistan’s youth1 consists one-fifth (25 million) of its population and is one of the most valuable resources for its national growth and prosperity. An educated, skilled, and healthy youth, in other words a developed youth, would most certainly put Pakistan in the course of social and economic enrichment. Hence, it is imperative to determine where Pakistan’s youth stands in terms of development characteristics and indicators. The present study is based on a national survey “Pakistan’s Youth: Transition to Adulthood: Education, Work and Marriage” undertaken in all four provinces by the Population Council in 2001-02, with a sample size of 8,074 youth and 6,812 households in 252 communities. The survey used three comprehensive questionnaires with various modules covering education, work, marriage, fertility, and living conditions of youth, their households and their communities. The survey also covered gender attitudes, norms, mobility, and safe places. The present paper has used the data from the above-mentioned study to work out “Youth Development Index” (YDI). The YDI is a simple summary measurement, as other development indexes, of four dimensions of the youth development concept: educational attainment, employment, recreation and health seeking behaviour. The index has been analysed with other independent variables to ascertain the links of various agents and determinants affecting the development of youth in Pakistan. Then a regression model has been used to finally ascertain the factors that are most significant in a young person’s life.
KEYWORDS: Pakistan, population, youth, living conditions, youth development index, YDI.

JEL: Y - Miscellaneous Categories.

In a democracy there is scarcely any public question of greater importance than the standard of living of the common people. It is essential to know the actual level of this standard of living, and whether it is improving or deteriorating. There can be two types of standards of living. One is the standard of living of the society as a whole, and the other is the standard of a group within the society. It is perfectly possible for the standard of the society as a whole to be improving, while that of one or more groups within the society is declining. Moreover, if the distribution of economic power in the society is very unequal, it may happen that the group, the standard of which is declining may constitute a very large proportion, even a majority, of the total population. Our aim is to explore that standard of living of the average household (the wage earner), taking into account the following factors. First, indices of price levels are almost always based on the prices of articles most of which do not enter directly into the budget of the wage-earner’s family. The increase in prices in recent years has affected different classes of commodities very differently, and that the commodities, the prices of which have fallen rapidly are those which belong to the category of luxuries, while those articles, the prices of which have risen at a rate greater than the average, are the necessities of life, which constitute the major part of the workingman’s expenditure. Second, an index of wage levels is likely to be meaningless because of the extreme difficulty in arriving at anything like an average of wages.
KEYWORDS: Pakistan, standard of living.

JEL: N/A.

The target set in the National Policy on Education (1998-2010) for primary level enrolment is 90% of the children of age group of 5-9. This again was an achievable target, provided the available resources were efficiently used and programme interventions were made in a timely fashion. But during the last five years, it has not been implemented effectively and efficiently due to rapid population growth, insufficient political will, a period of undemocratic governance, and poor management of scarce resources. Women and girls have been most affected by these negative factors. The national literacy rate for females is only 35%, compared to 59% for males, and in certain status the female literacy, enrolment and achievement rates are much lower. There are many issues related to low enrolment of females such as poverty and economic issues, inadequate school infrastructure, gender bias in content and teaching and learning processes and poorly qualified teachers. The analysis of the study indicates that the age of the child, parents’ schooling particularly the mother, income per capita of the household head and distance to school are relevant variables in explaining the probability of female enrolment at the primary school level.
KEYWORDS: National Policy on Education, Pakistan, resources, poverty,  school infrastructure, gender bias, household income.

JEL: I - Health, Education, and Welfare.

Pro-Poor Growth and Governance in South Asia: Decentralization and Participatory Development, Edited by Poona Wignaraja and Susil Sirivardana, Published by SAGE Publications, New Delhi/ Thousand Oaks/ London, 2004; ISBN: 81-7829-257-0 (India – Hb) pps 459. In the Forward of this book, Gowher Rizvi states that the present volume makes its particular contribution in recognising that the governance agenda, with an emphasis on participatory development, can be combined with systematic decentralisation of power and resources to the grassroots in order to lay the basis for sustained poverty reduction. The key to this process is community mobilisation through social movements and nongovernmental development organisations that can catalyse changes in the conditions of the poor. He goes on to say, "Decentralization without social mobilization creates scope for vested local interests to monopolize power and resources to their advantage". Also, Rizvi underlines the fact that social movements and organisations representing the poor can challenge the monopolisation of power and resources by officials and politically dominant groups and affect lasting social change and devolution of resources in a manner that is both democratic and reduces poverty.
KEYWORDS: Book review, poor, pro-poor, framework, governance, South Asia, India.

JEL: E - Macroeconomics and Monetary Economics, F - International Economics, G - Financial Economics, H - Public Economics, I - Health, Education, and Welfare, J - Labor and Demographic Economics.

Nurul Islam, Exploration in Development Issues, Selected Articles of Nurul Islam, International Food Policy Research Institute, Washington DC, Ashgate Publishing Limited, Hants, England and Ashgate Publishing Company, Burlington, USA, 2003, ISBN 0 7546 15952, pp 568, Price not mentioned. This collection of articles by a veritable stalwart in the field of economics, covers almost the entire spectrum of development issues ranging from Food Supply, Agriculture and the State, International Trade, Economic Assistance and Economic Policy. It is a book decidedly not for the uninitiated and to both comprehend and enjoy the work one has to have a certain devotion to the subject and perhaps even a modicum of passion for the same.
KEYWORDS: Book review, development, Nurul Islam, development policy.

JEL: N/A.

For the provision of better social services, the health sector has been an important part of national strategy for reducing poverty and income disparities among different income groups in Pakistan. The distribution of access to and use of health among households has been a long-standing concern among policy makers. In this study, government health expenditure is treated as a fixed factor that influences household health behaviour, conditional on such factors as household income, education, and family size. The results of the study suggest that government health expenditure is associated with higher use of both preventive and curative health services by children. The results also indicate that increased government expenditure is actually associated with lower use of health services by the children of the poor, although this negative association is generally weak. However, if increased government spending improves health care opportunities for the nonpoor more than for the poor, the total effect of government spending on the health outcomes of the poor could be less even though they have a higher marginal product of health care inputs.
KEYWORDS: Pakistan, health demand, social services, households, government expenditure, health care opportunities.

JEL: N/A.

The authors gratefully acknowledge the technical support of Indian Institute of Finance and IIF Business School. We would such as to thank Prof. Jaurahi Ali (University Utara Malaysia, Malaysia), Prof. Manuel Jose The paper has been accepted and presented at the 7th ISINI International Conference on “Frontiers in Finance and Economics” at Ecole Supérieure de Commerce de Lille, France. The paper was presented in the session Chaired by Prof. Patrice Fontaine, President, AFFI, France on 22nd August 2003 (16:00 – 18:30).
KEYWORDS: ASEAN, economic issues, international norms and practices, Focus of Total Quality, Total Quality Management, FTE, TQM.

JEL: N/A.

This study examines the impact of monetary variables on the balance of payments of Pakistan. Besides, exogoneity of monetary variables is also tested. The empirical findings of the study show that balance of payments is a monetary phenomenon and monetary policy could be useful in improving the foreign sector. The studies so far have not confirmed this effect. The study also shows that an increase in price level and real income lead foreign reserves to inflow. However, an increase in the interest rate, money multiplier and domestic credit lead international reserves to outflow. Partial sterilisation was evident in the short run. But in the long run, it tends to be equal to minus one, indicating no sterilisation effect on the foreign reserve movements. The central implication derived from the study is that an increasing government budget deficit leads to excessive expansion in domestic credit creation and as a result a loss of foreign reserves. The null hypothesis for exogoneity of price level, real income, interest rate and inflation rate to foreign reserves is accepted. However, the null hypothesis for the exogoneity of domestic credit is rejected for the general model but accepted for the linear model. It appears that monetary policy is effective in Pakistan
KEYWORDS: Pakistan, monetary variables, exogoneity, domestic credit, monetary policy, balance of payments, adjustments.

JEL: N/A.

Child labour has emerged as a serious, widespread and growing problem in many parts of the world. Asia has a large number of children employed as child labourers. Child Labour Survey 1996 reports that there are 3.3 million children working between the ages of 5 and 14 years in Pakistan. Developed countries have linked trade with child labour through the Harkin Bill and the Uruguay Round of Multilateral Trade Agreement (1994), which banned the market manufactured or mined goods produced in whole or in part by children under 15 years of age. Pakistan is also facing restrictions on some of its exports due to allegations of child labour. However, Pakistan has enacted the Employment of Children Act of 1991, which has banned employment of children below the age of 14 years.
KEYWORDS: Child labour, socio-economic conditions, labour force survey, Pakistan.

JEL: N/A.