Imtiaz Alvi, The Informal Sector In Urban Economy: Low Income Housing In Lahore, OUP, Karachi, 1997.pps 323. Price Rs. (Pakistani) 535/-. Cities play an increasingly important role in the economic standing of nations. Urban areas, with their anonymity and fast pace, can be nonconducive to societal cooperation. Social capital and trust are more difficult to develop and sustain in large groups. In many cases, interactions between parties are not repeated and therefore there is no incentive to develop reciprocal relations. In urban settings, people tend to cluster together in small communities and networks of support, but trust and goodwill for those outside immediate groups is minimal. High levels of intra-group social capital and very little inter-group social capital (referred to as "bridging social capital") may have profound effects on inequality, private sector development, government and public welfare.
KEYWORDS: Book review, Pakistan, Lahore, informal sector, low-income, local institutions, capacity.

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Giles Mohan, Ed Brown, Bob Milward and Alfred B. Zack-Williams, Structural Adjustment, Theory, practice and impacts, Routledge, London and New York, 2000, 215 pps, Price not mentioned. This book touches on almost each and every aspect of the extremely topical subject of structural adjustment, delving into the whys and wherefores, the rights and wrongs of the issue. Despite the somewhat technical nature of the subject, it reads more like a narrative. Yet because to my mind it is virtually a masterpiece and one of its kind, it should in fact be read in bits and pieces rather than in one go.
KEYWORDS: Book review, structural adjustment, neo-liberalism, poverty alleviation.

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The paper assesses trends in poverty and improvements in the material conditions of life of millions of people living in poverty and human deprivation. It discusses the growth and poverty dimensions and associated structural problems. Determinants of poverty in Pakistan are discussed with a view to identify areas of intervention and public policies. Poverty reduction and human development programmes are discussed to show that pumping financial resources to address the issue of poverty is not a correct strategy for poverty reduction and human resource development. The paper discusses the poverty reduction strategy to assess government commitment to poverty reduction and human resource development in a sustainable manner. It concludes that poverty reduction and human development in Pakistan is dependent on many factors particularly the strengthening of institutional capacity and availability of human and financial resources.
KEYWORDS: Pakistan, poverty reduction, human development, determinants, interventions, public policies, social indicators.

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The last 10 to 20 years have seen a rapid rise of a new school in Macroeconomics. One of the most interesting characteristics of this school is its use of non-econometric methods for predicting and calculating various variables of the economy. If traditional econometrics has lost some of the force it has had for decades, it is of interest to analyse the merits of the new system replacing it. Most importantly, it is of interest to study the methodological justification of this new system and the paradigm it rests on. The latter is the main purpose of this paper.
KEYWORDS: Macroeconomics, neoclassicism, dynamic programming.

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From a technological perspective, the paper is mainly concerned with finding the employment potential in different groups of industries of Pakistan. The role of factor prices in determining techniques of production in the industrial sector through elasticity of substitution has been analysed. Besides taking the large-scale manufacturing sector as a whole, three broad categories of industries viz., consumer goods, intermediate goods and capital goods industries has been selected in particular for the empirical analysis. By utilising the OLS technique, the cross-section analysis for the year 1995-96 has been made. Our results indicate the there is great potential for employment in the intermediate and capital goods industries provided there are no factor price distortions in the economy.
KEYWORDS: capital goods, empirical analysis, industries of Pakistan.

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The econometric estimates of saving functions for Pakistan covering the period 1960-88 are presented and examined in this study. The choice of this period for analytical purposes was necessitated by the availability of consistent time series data on numerous microeconomic and macroeconomic variables required for estimating a wide range of econometric models of saving behaviour. The study is divided into nine sections. The introduction and the basic issues for estimating saving functions are outlined in Section 1. Section 2 delineates Sectoral Accounting Framework for defining the inter-relationship between the main components of savings, investment and national income. Section 3 outlines the econometric methods, the nature of variables used and the basic saving functions for Pakistan. Section 4 deals with the important hypotheses about private sector saving behaviour and estimates of the related saving functions. The basic rationale and estimation of public saving functions have been taken up in Section 5, while the results of foreign savings functions are presented in Section 6. The model specification and estimation of domestic saving functions and national saving functions are covered in Section 7 and Section 8 respectively. The conclusions and limitations of the study are briefly discussed in Section 9.
KEYWORDS: Pakistan, employment potential, policy, employment, elasticity of substitution.

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Economic growth requires investment goods that may either be provided domestically or be purchased from abroad. Domestic provision requires saving; the foreign provision requires foreign exchange. If some investment goods for growth can only be provided from abroad, there is always a minimum amount of foreign exchange required to sustain the growth process. The distinctive contribution of the dual-gap analysis to development theory is that if foreign exchange is the dominant constraint it points to the dual role of foreign borrowing in supplementing not only deficient domestic saving but also foreign exchange. The Dual-gap theory thus performs the valuable service of emphasising the role of imports and foreign exchange in the development process. It synthesises traditional and more modern views concerning aid, trade and development. On the one hand, it embraces the traditional view of foreign assistance as merely a boost to domestic saving; on the other hand, it takes a more modern view that many goods necessary for growth cannot be produced by the developing countries themselves and must therefore be imported with the aid of foreign assistance. Indeed, if foreign exchange is the dominant constraint, it can be argued that dual-gap analysis also presents a more relevant theory of trade for developing countries which justifies protection and import substitution. If growth is constrained by a lack of foreign exchange, free trade cannot guarantee simultaneous internal and external equilibrium, and the gains from trade may be offset by the underutilisation of domestic resources.
KEYWORDS: Domestic provision, Pakistan, economic growth, Dual-gap theory, foreign assistance.

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It is highly desirable that the behaviour of imports is studied in both demand and supply scenarios. Many studies in international trade have estimated the price elasticities of demand but very few studies have been used to study supply behaviour in international trade. However, Khan (1974), Haynes and Stone (1983 a) and Arize (1986), using Simultaneous Equations estimation have reported estimates of import supply in international trade. To study the true behaviour of imports, the choice of the functional form is important. Different researchers have used different forms according to their objectives and inclinations. Leamer and Stern [(1970), pp.8-19] have discussed at length the functional form of the import demand but they have not said anything about import supply. Leamer and Stern (1970) noted that the linear and log-linear forms of the import demand are:
KEYWORDS: Pakistan, domestic income, imports, economic theory, liberalisation.

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A recent discussion conducted by the Anjuman Mimaran1 has generated a concept for urban development that has immediate relevance to Pakistan. It is based on high-density, low-rise, low-tech development that integrates housing employment and social infrastructure, with a balanced mix of income and occupational groups. This concept includes a location strategy that results in • Affordable housing for all income levels; • Release of pressure on existing urban centers • Injection of economic activity into rural areas; and • Sustainable “green” urban communities; The following extract from the discussion describes the central argument, supported by a physical layout and analysis of the proposed model. We would welcome any initiatives to take these proposals further towards practical implementation.
KEYWORDS: Pakistan, urban development, walkable city.

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“No single human being, human agency or group has a right to impose its view, in matters of the faith, on others. That must be left to every individual conscience to decide for him or her … Religious leaders and jurists, with their literalist training, often lack knowledge of societies and economies to have insights that may illuminate the fresh significance of old formulae”1 . In the previous issue of this journal, Zaman & Zaman (2001), by criticising Hamza Alavi, imply that the implementation of the so-called Islamic Banking is in the best interest of economy and only by following this system can we be serious Muslims. According to them, this implementation could be justified on the basis of modern economic and financial theories, and also by evaluating the financial system of developed countries. This paper only briefly discusses some acute theoretical and practical shortcomings in their article and suggests that the non-interest based system2 is not appropriate for the Pakistani economy, at least in the conceivable future.
KEYWORDS: Response, interest, modern economy, Islamic banking, criticism, equity financing and asymmetric information.

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There can not be any doubt in the minds of economists, sociologists, political scientists or the general public that external debt has become a burden for poor nations rather than the much-advertised source of financial help to these countries. In the words of the late Cardinal Hume, Archbishop of Westminster, “Whatever the detailed history of today’s debt ridden countries, nearly all have one key fact in common: that those who could be blamed the least, the poorest people in the poorest countries, have suffered the most”. The British Chancellor of the Exchequer Gordon Brown said, “The debt of poor countries is a great moral issue of our day and this decade. It is the greatest single cause of poverty and injustice across the earth and potentially one of the greatest threats to peace”. He added, “We must cut the debt and do so now”. In the words of Mikhail Gorbachev, “Nothing is more important than the debt question. It is absolutely necessary to resolve the problem as soon as possible. We cannot keep waiting”. The great African leader Julius Nyerere said, “Is it right that we starve in order to pay our debts?”
KEYWORDS: Pakistan, debt retirement, debt burden, debt position, balance of trade.

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Vinod Thomas, Mansoor Dailami, Ashok Dhareshwar, Daniel Kaufmann, Nalin Kishor, Roman Lopez & Yan Wang - - - The Quality of Growth – Oxford University Press. 2000, pp. 231. Price not mentioned. “The Quality of Growth” is a combined effort of economists at the World Bank to give a broader perspective of development and the means of measuring it at the end of the 20th century. The 1st chapter focuses on the development scene over the last four decades from 1960 to 2000, in terms of natural and environmental growth factors besides the conventional GDP measures. It highlights the importance of sustainable development and the factors that need to be emphasised for growth in development in real terms, accounting for elements such as; life expectancy, education, air and water pollution, reduced mortality rate, higher literacy rates besides increased income levels.
KEYWORDS: Book review, quality of growth, World Bank, government agencies.

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Kanchan Chopra & S. C. Gulati, Migration, Common Property Resources and Environmental Degradation: Interlinkages in India’s Arid and Semi-arid Regions; SAGE Publications, New Delhi, 2000. pps 164. Price Rs. (Indian) 350/-. This book tries to develop linkages between poverty, environmental degradation, and migration. The premise is that poverty leads to environmental degradation, and degradation of natural resources in rural areas, which results in ‘degradation’ pushed ‘imigration’ to urban areas and this also happens to be the major cause of the degradation. The book uses a complex set of hypotheses, which have been tested with primary data inputs from field-based surveys in Rajasthan, India.
KEYWORDS: Book review, India, poverty, migration, environmental degradation, policy recommendation.

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Tasneem Ahmad Siddiqui, Towards Good Governance, Oxford University Press, Karachi, 2001, Price: Pak Rs. 495/-. Tasneem Ahmad Siddiqui is a bureaucrat turned author and that in itself speaks volumes about the book under discussion. It is an absorbing and refreshing publication, but somewhat lacking in expression. It is amply apparent that the author has his heart in the right place and the ideas are sound and convincing. In essence, though replete with insights and jarring home truths, it is an exhaustive litany of laments and then, eureka, the author has simple, easy to follow solutions to all the ills plaguing Pakistani society. The saving grace of course is that unlike the majority of Cassandralike intellectuals of whom there is no dearth, Siddiqui hopes against hope and sees a plausible way out of the morass.
KEYWORDS: Book review, good governance, mechanisms, Pakistan.

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The economics profession has recently started to give increased recognition to the need for restraining capital movements and exercising greater care in opening up capital accounts in developing countries.1 This is a significant development, for, not long ago, unfettered flow of capital across countries was being hailed as a means for improving global efficiency and promoting world welfare. At its annual meetings in 1997, the IMF had pushed to incorporate capital account convertibility into its Articles of Agreement. However, the gravity of the East Asian crisis drove home the dangers inherent in premature deregulation of financial markets and freeing of capital movements, at least as far as developing countries are concerned.
KEYWORDS: open trade regimes, free capital mobility, market liberalism, exchange controls, capital account.

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Everyone has the right to a standard of living adequate for the health and well being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. Article 25.1 of the Universal Declaration of Human Rights, 1948. States should undertake, at the national level, all necessary measures for the realization of the right to development and shall ensure, inter-alia, equality of opportunity for their access to basic resources, education, health services, food, housing, employment and the fair distribution of income. Effective measures should be undertaken to ensure that women have an active role in the development process. Appropriate economic and social reforms should be carried out with a view to eradicating all social injustices. Article 8.1 of Declaration of the Right to Development adopted by the General Assembly Resolution 41.28 on 4 December 1986.
KEYWORDS: Pakistan, social development, economic development, standard of living, equal opportunity, Constitution of Pakistan.

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The Arbitrage Pricing Theory (APT) of Ross [1976] is one of the most important building blocks of modern asset pricing theory, and the prime alternative to the celebrated Capital Asset Pricing Model (CAPM) of Sharpe [1964], Lintner [1965], and others. This paper briefly reviews the theoretical underpinnings underlying the APT and highlights the econometric techniques used to test the APT with pre-specified macroeconomic factors. Besides this, the prime objective of this study is to perform an empirical test of the APT in the Pakistani stock market by using pre-specified macroeconomic factors and employing Iterative NonLinear Seemingly Unrelated Regressions (ITNLSUR). These empirical results will be, hopefully, helpful for corporate managers undertaking cost of capital calculations, for domestic and international fund managers making investment decisions and, amongst others, for individual investors who wish to assess the performance of managed funds.
KEYWORDS: Arbitrage Pricing Theory,  Capital Asset Pricing Mode, Pakistan, arbitrage portfolio, macroeconomic factors.

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During the last three decades, the Ricardian Equivalence Hypothesis (REH) has been an important theme of economic research both theoretical and applied in the industrial countries especially the US. However, very limited work has been done in the developing countries to test the validity and consistency of this hypothesis. In this paper an attempt has been made to present some empirical tests of the hypothesis for Pakistan using the macroeconomic data for the period 1960-88 based on the standard Blanchard-Evans Models of intertemporal allocation of resources as affected by the perceptions of the consumers about debt accumulation. The paper has been divided into three parts. In part-I, a brief introduction to the Ricardian Equivalence Hypothesis as well its origins has been delineated. In part-II, the Blanchard (1985) Model has been outlined along with the testable hypotheses as derived by Evans (1988). Part-III summarily presents the results of the Blanchard-Evans Models as applied to Pakistan data. These results fail to validate the Ricardian Equivalence Hypotheses for Pakistan. However the results are sensitive to the manner in which the critical variable namely “wealth” is defined and the manner in which the models are estimated. Therefore, further research is required on the subject especially in the contest of Pakistan’s economy which has accumulated large public debt so as to analyse precisely the extent to which public debt is discounted by the consumers as future tax liabilities.
KEYWORDS: Ricardian Equivalence, Pakistan, Blanchard-Evans Models.

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Federal Minister for Labour Manpower and Overseas Pakistanis, Omar Asghar Khan has announced the draft of the labour policy. The policy focuses on the law to eliminate child labour in the country. According to the Minister the law would be implemented from January 2001 and before the year 2005 there would be no child or bonded labour in Pakistan. Moreover, Under ILO obligation Pakistan has to achieve the objective of elimination of child and bonded labour by the year 2005. ILO plans to impose sanctions on the exports of those countries where child and bonded labour continues. Furthermore, the country has to abide with the convention of the International Labour Organization as a member of this club1. Most of the studies about child labour in Pakistan are based on micro-data. The present study/survey is another addition to the previous studies with some additional variables. The focus of the study is socioeconomic aspects of child labour in auto-workshops, as 18 per cent of child labour is engaged in this establishment2 . Some comparisons between the conclusions of the present survey and that of the previous ones have also been made. On the basis, policy recommendations have also been proposed.
KEYWORDS: Child labour, Pakistan, ILO, legislation.

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credit? This question has acquired some urgency in the wake of the recent Shariat Court ruling banning interest in Pakistan. Some pundits have pronounced that great harm will result from the banning of interest1. Actually, such pronouncements are based on a lack of understanding of both the modern economic system, as well as the nature of the Islamic prohibition of interest. As we hope to demonstrate clearly below, the modern economy can function very well, indeed better in some ways2, with a prohibition on interest rate payments of the Islamic type.
KEYWORDS: Interest-based credit, modern economy, Islamic system, bank credit, Pakistan.

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