Impact of Workers Remittances on Economic Growth: Evidence from Pakistan
The underlying study intends to show the impact of workers' remittances on the short and long run economic growth of Pakistan. Workers' remittance inflow characterizes a mechanism for capital transfer from developed countries to under developed countries, and workers' remittance inflow is considered the second-largest external funding source, behind Foreign Direct Investment (FDI) for developing countries like Pakistan.
In this study, in order to scrutinize the deeper dynamics of workers' remittances on economic growth mechanism of Pakistan, along this line, the study looks into the following areas: (I) to examine the direct long & short term relationship between workers' remittances and real economic growth, (II) to estimate the long and short run impact of worker's remittances with some addition of policy variables (inflation, exchange rate, trade openness, secondary school enrollment , unemployment rate) on real economic growth of Pakistan. By using the ARDL approach for the period 1973-2010.
The findings suggest that there is strong positive long run as well as the short run relationship exists between workers' remittance inflow and real economic growth. Therefore, the government should realize effective macro-economic policies along with momentous improvements in the structure and functioning systems of governance for stabilizing economic growth along their determinants and given the important role of remittance, the key challenge for the government is to provide incentives to attract more remittances sent through official channels and ensure their productive use
Impact of External Debt on Economic Growth: A Comparative Study of Pakistan and Malaysia
This Study comparatively analyzes the impact of external debt on economic growth of Pakistan and Malaysia from 1970 to 2010. In order to examine the linear and non linear impact of debt on economic growth, the New Classical Growth Model is used by incorporating debt indicators like debt to GDP, debt servicing to GDP and debt servicing to exports and some macroeconomic variables including, growth rate of exports (^Exp/Exp), growth rate of Investment stock (GCAP), investment to output ratio (RGFI/RGDP) and Terms of Trade (TOT). The Econometric technique of Ordinary Least Square (OLS) is used in order to estimate the models.
The results of the study show the non- linear impact of external debt on economic growth of Pakistan and Malaysia. On the other hand, the macroeconomic variables like growth rate of exports, growth rate of investment (Gross investment) and Investment to GDP (Domestic resources) have shown positive and significant impact on economic growth rate of both countries. This indicates that these macroeconomic variables are playing their important role for enhancing the economic growth. The negative and significant impact of debt to GDP and debt servicing to exports ratio with investment output ratio confirms the Debt Overhang and Liquidity Constraint Hypothesis for Pakistan and Malaysia. But overall results for Malaysia are better than Pakistan which shows the better allocation and management of debt.
The study suggests some policy implication for Pakistan for better management of debt, through coordination in macroeconomic policies, reduction in fiscal deficit and current account deficit, proper allocation and management of debt and by enhancing the role of private sector.
Impact of Urbanization of Economic Growth in Pakistan
This study analyzes the impact of urbanization on economic growth of Pakistan from 1975 to 2010. We develop five models in order to examine the impact of urbanization on economic growth. We formulate a model in which impact of urbanization on overall economic growth. Real per capita income growth (RPYG), urbanization (UR), Government expenditure (G), capital stock (KS) and inflation (INF) are the explanatory variables.
This study utilizes co-integration theory and error correcting model to make an empirical research on the relation between urbanization and GDP in Pakistan. Johansan Co-integration Test is used as econometric technique in order to estimate the model.
The result of the study shows that urbanization affects economic growth positively and significantly, the result shows a long-term balance relationship between urbanization and economic growth. Furthermore, we check the impact of urbanization on economic growth of different sectors of the economy.
The results show that urbanization and GDP of agriculture sector are negatively and significantly related to each other. However there is strong positive relationship between urbanization and GDP of industrial sector, manufacture and services sectors. Overall the results indicate that urbanization is an important component of economic growth.
Financial Development and Economic Growth in Pakistan
A great deal of literature determined the relation between financial development and economic growth; nevertheless many concerns still remain, for instance, the direction of causality and varying results with varying types of data and proxies for financial development.
In this study the finance-growth nexus in Pakistan has been assessed for the period of 1971-2011. The long-run relationship between finance and growth is investigated through the cointegration analysis. The ARDL approach is utilized to determine the link between financial development and economic growth along with some policy variables (share of investment, inflation and dummy as a representative of government reforms).
The results are found to be consistent with the studies as described in the literature, indicating that there exists a stable and positive relationship between financial development and economic growth in Pakistan for the period of 1971-2011. Bi-directional causality has been experienced among finance and growth. Furthermore, the share of investment and government reforms are found to be significant in playing a vital role for the financial growth nexus, whereas, the inflation rate has proved statistically insignificant. Finally, it is concluded that there is an ardent need to develop and stabilize the financial system in order to experience high growth rates.
An Economic Analysis of Foreign Direct Investment in Pakistan
This study intends to show the impact of locational economic determinants on Foreign Direct Investment in short run and long run. FDI is one of the most important sources of capital inflow used by the developing economies to fulfill their economic needs. Pakistan, as a developing country, is also a large recipient of FDI, but unfortunately the inflow of FDI in Pakistan is small and concentrated only in a few areas.
In this study, we examine the short run and long run relationship between FDI, real GDP, exchange rate, inflation rate, infrastructure facilities and the democracy by using Autoregressive Distributed Lag Model (ARDL) for period 1971 to 2010. We also examined the causality between FDI and real GDP.
The findings suggest that gross domestic product, infrastructure facilities and democracy has positive and significant relationship with FDI in long run as well as in short run, while exchange rate and inflation rate has no effect on foreign direct investment in long run. Although, FDI is growing in Pakistan but this inflow is not enough. It is not very encouraging as compared to other economies of this region. Therefore, government policy makers should try to make a friendly business environment so that investors feel easy with legal and financial framework of the country. The policy makers must made efforts to control the volatility in exchange rate and inflation through effective monitory policy measures.
Impact of Higher Education On Gross Domestic Product
Education is the key to the socio-economic development of an economy. It plays a very important role to enhance the capabilities of individuals and to speed up the economic growth of a country. The positive outcomes of education include eradication of poverty and inequality, improvement in health conditions of individuals, enhancement in social status and overall strengthening of a society. Education also provides essential elements for policy framework. Pakistan is a developing country which needs special attention towards education policies in order to enhance and continue the economic growth.
The study aims to investigate impact of higher education on Gross Domestic Product of Pakistan from 1981 to 2013 using econometric approach Johansen Cointegration (1995), Granger causality approach in Vector Autoregressive framework and Unit root test. The main emphasis was on to know the impact of Higher Education Commission since its inception. It examines whether higher education effect GDP in Pakistan. The econometric analysis reveals that there is a long run relationship between higher education and GDP, which provide evidence that these variables are necessary for each other. The empirical results of causality test specify that there exists a unidirectional causality running from economic growth to higher education and no other direction of causality found between these variables.
Dynamics of Energy Consumption and Economic Growth in South Asian And Asian Countries
Energy consumption has an important role to determine the economic growth directly as a key input of production process and indirectly it has also a significant role in all sector of the economy. The study explores the simultaneous relationship between energy consumption and GDP growth of 5 South Asian and 5 ASEAN countries for the period of 1974-2013. To investigate the short run and long run dynamics between energy consumption and GDP growth; Pedroni (1999,2004) panel co-integration technique has been used and checked that whether these variables are co-integrated with each other or not. Dynamic OLS (Pedroni, 2001) has also been used to check the long run elasticities of the variables. Further Engle and Granger (1987) test has applied to check the direction or way of causation between these two variables.
The results of this study show that there is long run and positive relationship between energy consumption and GDP growth. All the Coefficients through Dynamic OLS are statistically significant and explaining the long run changes in GDP growth. The results of panel Granger causality test show that there is bi-directional causal relationship between energy consumption and GDP growth in short run and long run both in South Asian and ASEAN regions. Moreover these results suggest that energy consumption has a major role in GDP growth and vice versa.
The findings of this study have some important implications related to the energy consumption and GDP growth policies in case of South Asian and ASEAN regions. The implications of feedback hypothesis between energy consumption and GDP growth suggest that any shortage because of any reason such as non-policy or policy actions in these two regions retard their GDP growth directly. Further this feedback relationship also suggests that any protectionist policy of trade in case of energy resources to restrict the imports or exports of energy resources have harmful consequences for GDP growth in these two regions. Therefore it is necessary to build or discover the new energy resources such as nuclear, solar and wind power plants, new dams, coal and gas resources and tidal energy resources should be established in all of these countries to meet the rapidly increasing energy demand to promote their GDP growth.
Evaluating The Impact of Foreign Direct Investment on Economic Growth of Pakistan
Foreign Direct Investment (FDI) plays an imperative role in the development of a country particularly in case of underdeveloped and developing economies. For such economies, FDI plays a significant role of bridging the gap between the existing resources and the required resources.
This study investigates the long run relationship between the economic growth and FDI using data from 1971-2012. For this purpose we have used cointegration approach. In order to investigate short run relationship between the economic growth and FDI we have used Error Correction model. We also have used interactive dummy variable in order to compare the impact of FDI in the aftermath of 9/11 incident. Empirical results confirm the existence of long run cointegrating relationship between FDI and economic growth.
The result is robust even if we exclude the FDI as independent variable and include it as interactive dummy. Error Correction model show that both of the models (First without FDI and second with the inclusion of FDI as independent variables) are stable and show convergence towards equilibrium. It shows that when we include both FDI as well as dummy variable, the model is stable and the adjustment is 22 % each year toward the long run equilibrium. Whereas, when we use only interactive dummy the adjustment is 11 percent annually.
As far the impact of FDI is concerned, it has negative but insignificant impact when used separately however, its impact become positive and significant when use it as interactive dummy. Similarly, in the second model when we include only interactive dummy for FDI, it has negative but insignificant impact on economic growth. Other independent variables also have almost positive impact on economic growth.
Role of Institutions and Economic Variables on Tax Revenue of Selected Asian Developing Countries
Tax revenue is an important factor to finance different sectors of any country. The role of institutional and economic factors is considered to be most influencing to generate more revenue for a country through taxes. This study explores the positive and significant relationship between institutional factor and tax revenue of seven Asian developing countries such as Pakistan. India, China, Bangladesh, Srilanka, Indonesia and Thailand for the period of 1996-2014. To examine the existence of long run relation among variables Pedroni (1999, 2004) and Kao panel cointegration technique have been used and after confirmation of long run relation among variables Fully Modified Ordinary Least Square (FMOLS) has been applied to attain long run elasticities of the variables. Further Engle and Granger (1987) test has applied to check the direction or way of causation between these two variables.
The results of this study show that there is long run and positive relationship between Institutions and Tax revenue. Fair and transparent governing system, effective rule of law, control of corruption in tax collecting authorities tremendously increase the tax revenue of the country. Furthermore among economic trade (as a percentage of GDP) and inflation are positively affecting the tax revenue whereas agriculture share in GDP is negatively affecting the tax revenue. All the Coefficients through FMOLS are statistically significant and explaining the long run changes in tax revenue. Moreover these results suggest that institutional factors have a major role in tax revenue.
The findings of this study have some important implications such as simplifying rules on tax payment, internal audit of tax administration, provision of incentives to tax administration staff to overcome the corruption problem are given that provide a road map to increase the tax revenue in of Selected Asian developing countries.
Determinants Of Joint Labor Force Participation Decision Of Husbands And Wives And Wage Determination in Pakistan
The analysis of labour force participation decision has been an important theme in labour economics during the past 50 years. Labor force participation of men and women is postulated to play an important role in socio-economic development at the micro level by providing a steady income stream that allows the household to maintain a decent standard of living and escape the clutches of poverty. The theoretical and empirical interest in this area was driven primarily by the surge in female labour force participation witnessed in the developed world in the post Second World-War period, which coincided with the steady improvement in living standards in developed countries. The rise in female participation was pushed by the entry of a large number of married women in the labour force; in the United States labour force participation of married females rose by nearly 130 percent during the period 1959-1999, with participation of their married male counterparts staying at roughly the same level during the period during review (Bar and Leukhina 2011).
Globally, a large number of studies have examined various important aspects of an individual’s labor supply decision – whether to work, how many hours to work and at what wage rate. A few studies have also analyzed the collective household labor supply decision making process ; while the joint labor force participation decision of married couples has been examined by only a small number of studies. The neoclassical theory of time allocation has been used as the preferred theoretical framework in empirical work, analyzing the labour force participation decision making of individuals. According to this framework, individuals seek to maximize their utility level by allocating their time between market activities and non-market activities. If the value of market activities (wage rate prevailing in the market) exceeds the value of non-market activities (as could be assessed on the basis of tastes and preferences of the individuals), they decide to participate in the labor market and vice versa [Lisaniler and Bhatti (2009)]. According to Kaufman and Hotchkiss (2003), it is not necessary for either husband or wife to stay full time at home, as services for many household activities (cooking, cleaning and childcare) can be hired out or can be done in a goods intensive manner. For husband and wife to achieve an optimum allocation of time, each should work an additional hour in market as long as the wage rate exceeds the value of that hour spent on household work.
The present study fills this gap by investigating the joint labor force participation decision of husbands and wives in Pakistan, by modeling the determinants of joint labor force participation of married couples as dependent on several explanatory variables. This study identifies the various social, economic and demographic factors, which influence the labor force participation (LFP) decision of husbands and wives in Pakistan. The study is based on data from the Pakistan Labor Force Survey (2007-08) using the sample of currently married heads and their wives aged 10-64 years, separately for the urban and rural areas of the country.
The has employed multinomial logit model in order to investigate the impact of different factors on labor force participation decision of husbands and wives. The study also investigated the determinants of wage function of husbands and wives. The study finds that education level of husbands and wives has strong and positive impact on their LFP decision, hours of work and wages. Husbands have higher probability to participate in labor market than wives. Moreover, husbands and wives in the households belonging to urban areas are more likely to work than those in rural areas. they work longer hours and earn higher wages. Among demographic factors, age, family set up and presence of small children (0-5years) also greatly affect the LFP decision of married couples.
Key Words: Labor force participation, Decision, Factors, Husbands, Wives, Households,
This study aims to evaluate non-market value of Rohtas Fort. This study is based on primary data collected from 200 visitors, selected randomly. The data was obtained through structured questionnaire. For analysis Individual Travel Cost Method, descriptive statistics, priority and satisfaction indices were used. Findings revealed that the annual consumer surplus for an individual visitor was Rs. 7781 while the annual total consumer surplus was Rs. 855.92 million. Consumer surplus can be improved up to Rs. 883.32 million per annum if desired improvements are made. The total recreational (use) value of the Fort was Rs. 1150.45 million and this can be increased to Rs. 1177.85 million if desired services are provided. The major influencing factors of visitation frequency were observed as Travel Cost, Household Income, Age, Household Size, Education and sex dummy followed by their respective coefficients as -0.00134, 0.0000035, -0.039, -0.26, 0.087 and 0.63. The satisfaction index value of 1.1 showed that visitors were highly satisfied for museum as compared to other services. Sample visitors reported dissatisfaction for the waste disposal services, with index value of -1.21. Cleanliness is a major problem faced by visitors with highest priority index value of 0.88. Because on findings of the study, it is recommended that the authority should arrange proper waste disposal system. In addition, the authority should solve the problems of renovation and reconstruction, public parks, parking, maps and direction signs in the Fort, which will ultimately add to the value of the forte. After providing the desired services, the authority would have sufficient resources for renovation and maintenance. The authority can use this estimated consumer surplus to find the optimal entrance fee for the Fort.
The Impact of Macroeconomics Variable on Economic Growth of Pakistan
The main purpose ofthe study is to analyze the impact of the macroeconomic indicators imports, exports, international reserves, exchange rate, GNP and external debt servicing on external debt of Pakistan economy. This analysis covers 38 years history range from 1972 to 2010.In this study, three models are applied to investigate the macroeconomic variable impact on external debt of Pakistan. Ordinary Least Square (OLS) technique is used, results imply that imports, exports, exchange rate and debt servicing have positive and significant relation with external debt. Whereas GNP and International Reserves are negatively related to external debt. Johansen Co-integration is applied todetermine statistically long run relationship between total external debt, Imports, exports, international reserves, GNP and external debt servicing which confirm the long run association among macroeconomic variables. Error correction model is also deployed to observe short term dynamics which is reported to be 47% for the adjustment of the indicators.Finally Ratio analysis was designed to measure Pakistan’s economy debt burden and debt capacity measurements which indicates that Pakistan economy is still out of default risk in the context of external debt sustainability indicators.
Political Terrorism, Economics Policies and Economic Growth across Different Political Regimes; A Panel Data Analysis
The relationship between political regimes (Democracy and Dictatorship) and economic growth is not new to the literature of political economy. In this piece of study, we investigate implication of different economic policy variables on economic growth across political regimes. We used data from 159 nations for the time 1974-2013. In this study we apply system GMM technique to our linear dynamic panel data model. We draw three main conclusions. First is that although both regime shows that government expenditure has negative impact on economic growth, but the negative impact is relatively lower in democratic regime. Similarly, tax revenue shows significantly positive impact on economic growth in democracies while in dictatorship its impact is insignificant. Second is that money supply shows positive and significant impact on economic growth in democracies while negative and significant impact in dictatorships. Similarly, democracies are more inflationary in nature as compared to dictatorship. Third is that trade volume shows negative and significant impact on economic growth in dictatorship while positive and significant impact in democracies. In the same manner tariffs on trade shows negative impact in dictatorship but positive and significant impact on economic growth in democracies. Last a related phenomenon that is political terrorism. Political terrorism shows negative and significant impact on economic growth in dictatorship while negative but insignificant impact in democracies.
Key words; Economic growth, democratic and autocratic regimes, fiscal, monetary and trade policies and political terrorism.
“The role of governance quality in the effectiveness of capital inflows in Pakistan”
Foreign capital and good governance plays a very essential role in the development process of any country. High quality of governance can establish predictable, fair and consistent implementation of the rules in the economy to smoothen its growth path. Despite receiving large quantities of foreign aid (FA) and Foreign direct investment (FDI), Pakistan like many other developing countries, has remained stagnant and become more aid dependent. This grim reality provokes the concept to examine the effectiveness of capital inflows by incorporating the role of governance quality in achieving the economic growth. Moreover the hypothesis is also investigated i.e. the countries that receive more FA becomes able to attract more FDI but this occurs only in the presence of good quality of governance. One of the causes for the limited growth effects of capital inflows in Pakistan is found to be the existence of weak quality of governance. The five main models with different combination of variables are being analytically established for Pakistan during the period in between 1984-2012. The study has made use of Johansen (2001) co integration and Toda and Yamamoto (1995), and Dolado and Lutkepohl (1996) granger non-causality testing procedures. By utilizing of Block endogeneity Wald test, a bi directional causality strictly running from FA to FDI, DINV and GQ is evidenced. While a one way causality is running from economic growth towards FA is also found. In addition, the results reveals in favour of growth-led FDI rather than FDI-led growth in Pakistan. FDI and FA are not complementary flows rather they are substituting flows. Assistance accumulates domestic capital which helps in enhancing DINV. Moreover it is very crucial to enhance the GQ in Pakistan and innovations in governance framework are needed to be done for better outcomes on as and when required basis.
Key Terms: Economic Growth, Foreign Aid. Foreign direct investment, Governance quality, Toda and Yamamoto and Dolado and Lutkepohl methodology/