Trade Liberalisation and Regional Disparity in Pakistan

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  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2009-01-14
  • Publisher: Routledge

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This is the first study to distinguish possible link between trade liberalisation and regional disparities under dissimilar political regimes, such as autocracy and democracy. It uses Pakistan as a case study to draw broader lessons for other developing countries.Pakistans military, which has directly controlled the countrys affairs for more than one-half of its post-independence history and which often retained real political power even during periods of democratic rule, has played a major role in trade liberalisation. Regional disparities have increased steadily since the beginning of major trade liberalisation attempts in the 1980s, and at present, regional conflicts and the associated regional disparities are extremely high. The authors critically review the country's political economy of trade liberalisation and the story of regional disparities. Thereby, possible relations among political regimes, trade liberalisation and regional disparities are identified. Using the specifically developed computable general equilibrium (CGE) model, the effects of trade liberalisation on regional disparities are quantitatively examined, with an emphasis on the major export industries at the national level and on the relative output and employment growth at the regional level.This book will be of interest to academics and economists interested in development economics in general and South Asia in particular.

Table of Contents

List of figuresp. xvii
List of tablesp. xviii
Prefacep. xix
Acknowledgementsp. xxi
Acronyms and abbreviationsp. xxiii
Introductionp. 1
Pakistan as a case studyp. 2
Recent developments in Pakistanp. 4
Scope and objectives of bookp. 9
Outline of bookp. 11
Political economy of trade policy regimes in Pakistanp. 13
Analytical review of trade policies under different political regimesp. 15
Bureaucracy-led ad hoc trade policies: 1947-52p. 15
Bureaucracy-controlled highly protected trade regime: 1952-8p. 17
Trade policy under first military government: 1958-71p. 18
Gradual trade liberalization during pre-war period: 1958-65p. 20
Post-war stoppage of trade liberalization: 1965-71p. 21
One-stage trade liberalization under Bhutto's democratic government: 1971-7p. 21
Gradual trade liberalization under second military government: 1977-88p. 22
Trade liberalization attempts by four democratic governments under structural adjustment programs: 1988-99p. 25
Substantial trade liberalization programs under third military government: 1999 onwardsp. 29
Trade policy areas requiring further reformp. 34
Conclusionp. 35
Trade regimes, economic performance and structural changes in Pakistanp. 37
Bureaucracy-led trade regime: 1947-52p. 37
Bureaucracy-controlled trade regime: 1952-8p. 38
First military regime: 1958-71p. 45
Bhutto's democratic government: 1971-7p. 48
Second military regime: 1977-88p. 49
Return to democracy: 1988-99p. 51
Third military regime: 1999 onwardp. 52
Conclusionp. 55
Regional disparities and conflicts in Pakistanp. 57
Regional disparities leading to secession of East Pakistanp. 58
Overview of current regions of Pakistanp. 59
Major regional conflictsp. 61
Distribution of federal revenuep. 63
Distribution of water and Kalabagh Damp. 64
Exploitation of natural resources of Balochistanp. 65
Gwadar sea portp. 66
Expansion of garrisons in Balochistanp. 66
Issue of 'missing people'p. 66
Dismissal of chief justice and assassination of Benazir Bhuttop. 67
Analysis of regional socioeconomic conditionsp. 68
Poverty reduction strategy of Musharraf governmentp. 72
Rationale for modelling trade liberalization and regional disparitiesp. 73
Interactions between political and trade regimes and regional disparitiesp. 74
Conclusionp. 77
Methodology and datap. 79
Justification for using CGE modelling approachp. 79
CGE models versus econometric modelsp. 80
CGE models versus I-O modelsp. 81
CGE studies on Pakistanp. 82
General characteristics of CGE studies on Pakistanp. 82
Critical review of major CGE studies on Pakistanp. 83
Absence of focus on regional disparitiesp. 83
Usage of inadequate databasesp. 84
Highly aggregated industry and export resultsp. 84
Inadequacy of available CGE models in analysing the effects of trade liberalizationp. 85
Little focus on sensitivity analysisp. 86
Salient features of proposed CGE study in light of literature reviewp. 86
Structure of core CGE model used in this studyp. 87
Dimensions of modelp. 88
Variablesp. 92
Coefficientsp. 92
Equationsp. 93
structure of productionp. 93
final demands for commoditiesp. 93
demands for marginp. 94
market-clearing equationsp. 94
price system enforcing zero pure profit conditionsp. 94
trade balancep. 95
investment allocationp. 95
labour marketp. 95
miscellaneous equationsp. 95
Structure of regional approach of PAKREGp. 96
Selection of most appropriate regional modelling approachp. 96
Top-down approachp. 96
Bottom-up approachp. 98
Selection of top-down approachp. 100
Dimensions of regional extensionp. 101
Variables and coefficientsp. 101
Equationsp. 102
direct demands by each regionp. 103
demands for marginp. 103
determining regional share variablesp. 103
three constraintsp. 104
regional wage bills and matrix of contributionsp. 104
regional advantage matrixp. 104
Closure of modelp. 104
Short-run closurep. 105
Long-run closurep. 107
Database of PAKREGp. 109
Structure of database of core modelp. 109
Structure of database of regional extensionp. 112
Development of database of PAKREGp. 112
Conclusionp. 113
Application of modelp. 114
Simulations and closuresp. 115
National resultsp. 116
Macroeconomic resultsp. 116
Short runp. 116
Long runp. 120
Industry resultsp. 122
Impact of trade liberalization on importsp. 123
Impact of trade liberalization on domestic industry costsp. 128
Impact of trade liberalization on domestic industry outputp. 132
Impact of trade liberalization on domestic industry employmentp. 139
Regional resultsp. 143
Macroeconomic results: short run and long runp. 144
Determinants of regional output and employment growth in short runp. 145
Determinants of regional output and employment growth in long runp. 153
Systematic sensitivity analysisp. 161
Conclusionp. 165
Conclusionp. 167
Summary of main findingsp. 167
Policy implicationsp. 170
Lessons for other countriesp. 171
Limitations and future researchp. 172
p. 175
p. 182
p. 186
p. 194
Structure of production (industry inputs demands)p. 194
Demands for primary factorsp. 194
Demands for intermediate inputsp. 194
Top production nestp. 195
Final demands for commoditiesp. 195
Demands for capital creationp. 195
Household demandsp. 195
Export demandsp. 196
Government and inventory demandsp. 197
Demands for marginp. 197
Market clearing equationsp. 197
Domestic and imported commoditiesp. 197
Primary factorsp. 198
Price system enforcing zero pure profit conditionsp. 198
Productionp. 198
Capital creationp. 198
Householdsp. 199
Exportingp. 199
Importingp. 199
Distributionp. 199
Balance of tradep. 199
Imports, exports and balance of tradep. 199
Investment allocationp. 200
Distribution of investmentp. 200
Investment budget constraintsp. 200
Labour marketp. 200
Wage setting equationsp. 200
Remaining equationsp. 200
Industry costs and the index of production costsp. 201
Indirect taxp. 201
Indirect tax revenue aggregatesp. 201
Factor incomes and GDPp. 201
GDP expenditure aggregatesp. 202
Primary factor aggregatesp. 203
Decomposition of sales change by destinationp. 203
Decomposition of Fanp. 203
GDP decompositionp. 204
Other equationsp. 204
p. 205
p. 207
p. 208
p. 210
Direct demands by each regionp. 210
Demands for marginp. 210
Determining regional share variablesp. 211
Three constraintsp. 211
Regional wage bills and matrix of contributionsp. 212
Regional advantage matrixp. 212
p. 214
Data matrices and parameters required for implementation of PAKREGp. 214
Systematic construction of 36 I-O data matrices required for core modelp. 214
Elasticities and parameters needed for core modelp. 218
Estimates of Frisch parameter and other elasticitiesp. 219
Construction of database of regional extensionp. 222
Allocation of commodities/industries to national and local groupsp. 222
Compilation of regional commodity/industry sharesp. 223
Notesp. 224
Bibliographyp. 230
Indexp. 242
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