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Growth Diagnostics in Pakistan

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Author Info

  • Abdul Qayyum

    (PIDE)

  • Idrees Khawaja
  • Asma Hyder

Abstract

Following the Hausmann, et al. (2005) methodology, we attempt to identify the constraints to growth in Pakistan. We argue that governance failure and institutional shortcomings are the heart of the matter : corruption is rampant, judicial independence is low, educational institutions do not furnish the right kind of labour force, legal institutions do not protect the lenders against loan defaults, ambiguous land titles constrain mortgage financing and construction activity, labour market institutions restrict hiring/firing, State Bank of Pakistan (SBP) has not done its duty to contain the rising interest spread, and SECP/stock market has not played its due role in the transfer of funds from savers to investors. We identify three binding constraints to growth in Pakistan. These are : (i) poor state of governance, (ii) poor state of institutions, and (iii) lack of competitive environment (that restricts innovation and hence growth). Without improving the state of governance and that of institutions, sustainable growth cannot occur even if other factors, like a reasonable savings rate, are put in place.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22218.

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Date of creation: Jan 2008
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Handle: RePEc:eab:develo:22218

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Keywords: economic growth; Institutions and Growth;

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References

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  1. World Bank & International Finance Corporation, 2006. "Doing Business in 2006 : Creating Jobs," World Bank Publications, The World Bank, number 7421, 5.
  2. Asma Hyder, 2007. "Wage Differentials, Rate of Return to Education, and Occupational Wage Share in the Labour Market of Pakistan," Labor Economics Working Papers 22197, East Asian Bureau of Economic Research.
  3. Zafar Mueen Nasir, 1998. "Determinants of Personal Earnings in Pakistan: Findings from the Labour Force Survey 1993-94," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(3), pages 251-274.
  4. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  5. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
  6. Qayyum, Abdul & Kemal, A. R., 2006. "Volatility Spillover Between the Stock Market and the Foreign Exchange Market in Pakistan," MPRA Paper 1715, University Library of Munich, Germany.
  7. Dani Rodrik, 2006. "Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank's Economic Growth in the 1990s: Learning from a Decade of Reform," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 973-987, December.
  8. Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April.
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  16. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  17. Biais, Bruno & Bossaerts, Peter & Rochet, Jean-Charles, 2002. "An Optimal IPO Mechanism," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 117-46, January.
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  19. Stephen Guisinger & Mohammad Irfan, 1974. "Real Wages of Industrial Workers in Pakistan: 1954 to 1970," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 13(4), pages 363-388.
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Citations

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Cited by:
  1. Mohammad Irfan, 2009. "Pakistan’s Wage Structure, during 1990-91–2006-07," Labor Economics Working Papers 22979, East Asian Bureau of Economic Research.
  2. Adnan Haider & Musleh ud Din & Ejaz Ghani, 2011. "Consequences of Political Instability, Governance and Bureaucratic Corruption on Inflation and Growth: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 773-807.
  3. Mohammad Irfan, 2009. "Pakistan’s Wage Structure, during 1990-91–2006-07," PIDE-Working Papers 2009:54, Pakistan Institute of Development Economics.

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