Socioeconomic and Political Determinants of Public Spending Allocations: A Panel Data Analysis of Aggregate and Sectoral Spending

 By: Babar Amin, Mirajul Haq, Arshad Ali Bhatti

A well-established segment of economic literature argues for an efficient allocation of resources to overcome poor growth performance, poverty, and inequality. However, the resource allocation response towards these economic issues varies across countries. Based on their respective socio-economic and political fabric, countries set priorities and accordingly allocate the available resources towards different sectors of the economy. The sectoral allocation of the available resource pie has repercussions for various economic variables like growth, poverty, and income inequality. In this context, this study contributes to the existing literature on the subject in two ways. First, this study aims to assess the factors that determine overall public spending across economies by focusing on socio-economic, political, and institutional factors. Second, the study examines the role of those factors in determining health, education, infrastructure, and defence spending. The study uses the panel data of 104 countries for the period 1990-2016 and employs FE-IV method to conclude that bureaucratic quality, democratic accountability, internal conflict, external conflict, government stability, and military involvement are the main institutional and economic variables determining public spending allocations at the aggregate and sectoral levels.

Publication Link: https://pssr.org.pk/article/socioeconomic-and-political-determinants-of-public-spending-allocations-a-panel-data-analysis-of-aggregate-and-sectoral-spending

Convergence in Human Development across Districts of Pakistan: Evidence from Club Convergence Test

 by: Noor Ahmed, Babar Hussain, Arshad Ali Bhatti

Studies on the convergence club have become a focal point in economic growth and development literature over the last three decades. This paper analyzes the club convergence hypothesis going beyond the traditional use of GDP per capita. It examines the convergence club of 97 Pakistani districts over the period 2004-20015. The analysis is based on an augmented index for measuring development through convergence and the clustering method of Phillips and Sul (2007). The index consists of 3 sub-indices of education, health, and household welfare level, with each index further composed of 5 indicators. The Principal Component Analysis (PCA) is used to aggregate these indicators to get sub-indices and a final development index. Results of the study indicate that the districts do not converge to the same long-run equilibrium. Instead of overall convergence, we find eleven convergence clubs and one non-convergent group for human development. The existence of clubs means that measures aimed at reducing disparities in human development and promoting regional growth should consider the specific characteristics revealed in the convergence analyses. Spatial differences thus need to be addressed mainly through pro-poor regional policies.

Publication Link: https://pssr.org.pk/issues/v5/2/convergence-in-human-development-across-districts-of-pakistan-evidence-from-club-convergence-test.pdf

Roles of Corporate Governance and Ownership Structure in Dividend Smoothing Behavior of Asian Firms

by: Shakil Ahmad, Zulfiqar Ali Shah, Arshad Ali Bhatti

The study explores the determinants of dividend smoothing behavior of Asian firms for 2009-2018. The study used a firm's specific characteristics, corporate governance, and ownership structure variables as determinants of dividend smoothing in some Asian markets (Pakistan, India, Sri Lanka, Malaysia, and Singapore). Based on gender critical mass theory, the study finds the presence of gender-critical mass is positive and significantly associated with firm dividend smoothing behavior; whereas, the presence of fewer women depicts a negative or insignificant association with dividend smoothing behavior. The moderating role of gender diversity between family ownership and dividend smoothing is also examined. Further, contrary to the agency theory-based explanations of dividend smoothing, we find that family firms follow a smooth dividend policy. These findings suggest that gender-critical mass, family ownership, and higher market to book value contribute positively to dividend smoothing behavior in the Asian market.

Publication Link: https://tuengr.com/V11A/11A13TM.pdf

The Income Tax Impact on Macroeconomic Indicators: A CGE Inquest for Pakistan Economy

 By: Ghulam Moeen-ud-Din, Arshad Ali Bhatti, Hasnain Abbas Naqvi

This study is to analyze the impact of an increase in income tax on Pakistan economy`s selected indicators like GDP, national income, imports, exports, the balance of trade, private and public sector investment. The assessment utilizes the latest SAM 2010-11, developed by Dorosh et al. (2015), for Pakistan`s economy and uses a Computable General Equilibrium Model, consistent with Lofgren et al. (2002). To investigate the effect, two experiments of 5%, and 10% increase in income tax are performed. The results reveal that increase in direct tax results in improvement with regards to all important macroeconomic indicators. However, rural households’ categories express lesser improvement in comparison to urban households’ groups. Our experiment suggests that an increase in income tax should steadily be implemented to overcome the deficit in the public budget. 

Publication Link: https://qurtuba.edu.pk/jms/default_files/JMS/14_2/14_2_10.pdf

Developing a Financial Stress Index for Pakistan

by: Haleema Sadia, Arshad Ali Bhatti, Eatzaz Ahmad

Abstract 

This paper develops a financial stress index for the Pakistan economy covering the post-reform period. We use time series data for the period 1993M1-2016M12 and employ principal component analysis to aggregate various components of financial markets, real economic activity, and political risk in a single financial stress index. The computed index successfully explains the known periods of financial stress in Pakistan. It stresses upon the political and economic risks as important contributors of financial stress along with financial market factors. This composite index assesses the stability of the financial system, which is a public policy concern in most emerging economies. Thus, we believe that it can serve as an important benchmark to describe the systemic risk in the financial system.

Pub. Link: https://imsciences.edu.pk/files/journals/vol11_2019/New%205%20M.pdf

Measurement and Determinants of Multi‐Factor Productivity: A Survey of Literature

By: Tauqir Ahmed &  Arshad Ali Bhatti

This paper surveys and synthesizes fast‐growing literature on the measurement and determinants of multi‐factor productivity (MFP). We identify three strands of the literature to measure MFP: the first is growth accounting, which decomposes observed economic growth into the contribution of factor inputs and technological change, called the Solow Residual; the second is index number methods, accompanied by frontier techniques; the third is growth regressions and econometric methods used to estimate productivity across countries and regions. We keep our focus on assessing the major strengths and weaknesses of commonly used methods for MFP measurement and categorize existing literature on the determinants of MFP growth into macroeconomic and institutional factors. We attempt to provide a reassessment and thematic survey of literature on the drivers of aggregate productivity, enabling policymakers to formulate effective economic policy.

Publication Link: https://onlinelibrary.wiley.com/doi/abs/10.1111/joes.12360

Does Gender Inequality Lead to State Failure? A Global Perspective

By: Sami Ullah, Arshad Ali Bhatti, Tanveer Ahmad Naveed

The objective of this paper is to theoretically and empirically investigate the impact of gender inequality on state failure, taking to a global perspective. The ratio of female to male labor force participation has been used as a proxy for gender equality and the Fragile State Index of Fund for Peace has been used to classify state failure. This study has used panel data of 142 countries for the period 2006-2016 and employed the fixed effects method to reach the conclusion that gender inequality does indeed significantly lead to state failure in all regions of the globe. The crux of this study, however, is the negative effect of gender inequality on global order in the process of sustainable development. In addition to that, agricultural employment and children out of school too cause for the dwindling strength of states all over the world. All our findings reiterate the need for a comprehensive plan for the provision of economic opportunities to females for the prosperity of all developing regions of the globe. Gender inequality is one of the most significant factors that reflect their backwardness, and the expansion of opportunities, along with a feasible working environment, will bring positive change to the sustainability of their economies. 

Publication Link: https://uog.edu.pk/en/PJSI/issues/Vol-X