Economy of Pakistan. Words7 Pages. Introduction. Pakistan was established in and since its inception; it has been surrounded by countless issues, some of which are confined to ill-formed/missing infrastructure, insufficient refined resources, barren or obsolete factories and technologies, the Kashmir controversy and other fronts also Pakistan’s economy has been ragged by two back-to-back crises. The global fuel and food price hikes twisted severe macroeconomic complexity as public finances worsened, inflation climbed, and economic growth slowed down. In Pakistan, the global financial crisis approached at a moment when the financial system was still recovering from the global pricing shocks, thus making the position more terrible as macroeconomic conditions depreciated further and economic Feb 03, · ECONOMY HISTORY OF PAKISTAN First five decades When it gained independence in from UK. Pakistan's average economic growth rate since independence has been higher than the average growth rate of the world economy during the period. Average annual real GDP growth rates[16] were % in the s, % in the s, and % in the
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To browse Academia. edu and the wider internet faster and more securely, please take a few seconds to upgrade your essay on economy of pakistan. Skip to main content. edu no longer supports Internet Explorer. Log In Sign Up. Download Free PDF. What is Hidden, in the Hidden Economy of Pakistan?
Size, Causes, Issues and Implications Adnan Haider. Download PDF. Download Full PDF Package This paper. A short summary of this paper. READ PAPER. Size, Causes, Issues and Implications. The informal economy includes all those economic activities which are not reported or not included in the National Income Accounts. These include both legal and illegal economic activities. According to the Resolution adopted by the 15th International Conference of Labour Statisticians ICLSthe legal side of the informal economy comprises of units such as household enterprises, engaged in the production of goods and services with the primary objective of generating employment and income to the persons concerned, not necessarily with the deliberate intention of evading the payment of taxes or other legislative or administrative provision.
haider sbp. Authors are responsible for any error and emission, essay on economy of pakistan. Authors would like to thank Dr Waqar Masood Khan, Dr Hafiz A. We are also grateful to Dr Zafar M. Expenditure for production is often indistinguishable from household expenditure. The units as such cannot engage in transactions or enter contracts with other units, nor incur liabilities. A self explanatory Figure 1 provides a simple visual structure of formal and informal sectors and their inter linkages.
National Income Accounts NIA as per design also exclude many activities such as moonlighting, unregistered employment, unregistered income earned through FOREX, under reporting of retail sales, illegal employment child laboursuspect inventory evaluations, transfer of money through hundi, hidden rentals and barter business. All these economic activities by their nature act as an attempt to evade huge amount of taxes, thereby causing burden on the public treasury.
The persistent failure to manage economic system as reflected by a low tax-GDP ratio, an incredible increase in energy requirements, persistent upward inflationary movements especially in food items and consumer durables explains much of underlying truth of neglecting the quantification, causes and implications of the informal economy with in the public policy framework. The destruction of Earthquake and calamities of the recent flood in add a greater potential to the expansion of the hidden economy.
From socio-economic point of view, the unbridled price hike especially 1 The sectors in the formal sector and informal sector are identified only in the context of Pakistan on the basis of reviewed literature and discussions with the experts in the relevant fields. At international level, there is much contemporary debate about the essay on economy of pakistan of the informal sector in an economy and its potential in lessening poverty. The size and significance of the informal sector in Asia, contributing about 41 percent in the GDP, makes it a vital point of analysis for understanding the brunt of the downturn in the emerging economies of the region.
Thus, it is the need of the hour to find out whether or not the informal sector cushions against the self-perpetuating evil of poverty, and helps the stricken economy to escape from the steamrolling noose of recession in Pakistan.
These facts motivate us to undertake the current study and analyse the informal economy from different aspects in Pakistan. Since, it requires an effective check and balance which is quite unworkable especially in the underdeveloped and the developing economies. The only way left which is rather crude in its nature, is the indirect approach to estimate the size of the informal economy with the available data on macro economic variables.
Our contribution in this paper is to estimate the size of informal economy through five indirect approaches namely; Monetary Approach, Modified Monetary Approach through Dynamic OLS DOLSElectricity Consumption Approach, Structural Multi-Indicators Multi-Causes MIMIC Approach and Labour Market Approach, essay on economy of pakistan.
This blend of various approaches has been adopted for the first time in case of Pakistan. The rest of the paper is organised as follows: Section 2 outlines the review of relevant literature. Section 3 discusses the data and empirical methodology in detail, essay on economy of pakistan. Section 4 analyses the results and discussions. Section 5 contains the causes and implications of the informal economy which emerge from the analysis. Finally, Section 6 comprises of the conclusion also containing some public policy guidelines of the paper whereas results are reported in the appendix essay on economy of pakistan of the paper.
Consequently, it acts as a cushion against poverty and income inequality, especially during external shocks: see for example, Frey Across the emerging market economies, the informal sector continues to expand in both absolute and relative terms. A study by Ahmed surveyed various empirical studies on informal economy in the case of Pakistan.
The author shows his reservations on the empirical estimates of the size of informal economy available in all previous studies. He concludes that informal economy and tax evasion estimates are unreliable and highly doubtful.
Over the decades, the informal economy started to attract the attention of economists and policy makers as a result of which many approaches have been adopted to estimate the actual size of the informal economy, but each is tied with its own limitations. Out of all, first one is the labour market approach, the roots of which originate from the labour market by considering the number of workers actively participating in the informal economy and their total number of hours worked.
However, Pyle argues that it is not possible to accurately measure the number of hours worked and the average productivity. Moreover, this approach is useful for countries having small informal economy. Feige strived to guesstimate the size of the US economy from the standpoint of payments and transactions. The transaction method resulted in a negative hidden economy for the periodwhich illustrated a falling informal economy in the era of World War II.
An earlier attempt on this approach was made by Cagenwho was interested in explaining the long run behaviour of the currency to money supply over the period He assumed that currency was used to carry out transactions in the black economy and high taxes were responsible for the increased size of the black economy. Schneider estimated the size of the informal economy in developing, transitional and OECD countries by using the currency demand approach, essay on economy of pakistan, the physical input method and the structural modelling approach, essay on economy of pakistan.
The results concluded that the average size of the informal economy as a percentage of official GNI in the year was 41 percent for the developing countries, 38 percent for the transitional countries and 18 percent for the OECD countries. A large burden of taxation and social security contributions combine with government regulations were the main determinants of the size of the informal economy. For many years, the informal economy has been the centre of attention of many researchers in Pakistan,4 making tremendous efforts to quantify the actual size of this part of the overall economy through various approaches.
Shabsigh adopted the same route of monetary approach to estimate the underground economy for the period He used ratio of currency in circulation to total demand deposits M2-currency in circulation as a dependent variable while real per capita income, essay on economy of pakistan rate of interest, per capita banking services, average taxes on imports, exports and domestic activities were 3 According to Cagenpage.
Hidden Economy of Pakistan chosen as explanatory variables. He concluded that the size of the black economy was 21 percent of the total GDP in and declined slightly to The inclusion of bearer bonds along with currency in circulation revealed that the level of tax evasion has increased over the number of years but the black economy as a percentage of GDP registered a decline in Pakistan.
They concluded that the size of the informal economy declined from 52 percent in to 35 percent in Iqbal, et al. They have also estimated the sectoral decomposition of the underground economy.
The results concluded that the underground economy increased from Khalid estimated the underground economy for Pakistan using monetary approach but his estimates are different from those of Kemal due to different benchmark periods taken into consideration.
In addition to this, essay on economy of pakistan, Khalid added the real rate of interest and GDP per capita as independent variables while Kemal used GDP growth as a proxy to economic development, the results became evident that the underground economy as a percentage of GDP increased afteressay on economy of pakistan, reached a maximum in and then declined.
Yasmin adopted the monetary approach to measure the underground economy UGE through tax evasion in Pakistan over the period Estimating the currency demand equation to construct the size of the underground economy and tax evasion, the results demonstrated that the underground economy has increased enormously from Rs 12 billion in to Rs billion in Kemal used the same dependent variable as above while the explanatory variables were tax-GDP ratio, banking services, GDP growth rate and a dummy variable for the period to estimate the size of informal economy for Pakistan from He concluded that the informal economy increased from 20 percent in to 54 percent in and then declined to 37 percent in Kemal revised the old attempt of Kemal and used the best fit monetary approach to estimate the underground economy and tax evasion for Pakistan for the period — The rate of increase slowed down till and then followed an increasing trend till The underground economy ranges from Ahmed and Hussain made a comprehensive exercise to obtain the latest estimates for the size of the informal economy in Pakistan for the period by taking into account the tax and tariff reforms of s.
Based on the methodology of Ahmed and Ahmed with slight modifications, they came up with the conclusion that the black economy has a declining trend as a percentage of GDP due to the essay on economy of pakistan reforms involving rationalisation of tax rates.
Moreover, the inclusion of bearers bond in the model also increases the size of essay on economy of pakistan black economy. The informal sector as a percentage of GDP remained at 2 percent during s, 17 percent during s, 15 percent during s and 13 percent during s.
Similarly, the tax evasion as a percentage of GDP remained at 5 percent during s, 19 percent during s, 16 percent during s, and 11 percent during s and so on. Finally, in a essay on economy of pakistan study by Arby, et al. The modified monetary approach showed that the underground economy increased from less than 30 percent in s to 33 percent in s and then declined to 23 percent in s. The electricity consumption approach showed that the informal economy increased from about 5 percent in s to 29 percent in s and then declined to 27 percent essay on economy of pakistan s.
However, the MIMIC model showed that the informal economy was around 30 percent of the total GDP in Pakistan over the essay on economy of pakistan period, essay on economy of pakistan.
It also showed that business cycle in informal economy moved with the business cycle of the formal sector economy in Pakistan. Data To estimate the informal economy using various approaches, data over the annual frequencies from is used on various economic, political, institutional and demographical variables. Details on the construction and the sources of the data set are provided in Table 1of the appendix. Methodologies In order to estimate the informal economy, we used various structural and statistical approaches.
The list of approaches start from simple monetary approach as of Tanzimodified monetary approach using Dynamic Ordinary Least Square DOLS technique of cointegration, structural estimation approach using multi-indicators multi-causes MIMICelectricity consumption approach EC and labour market approach using statistical accounting. The next subsections consist of descriptions on each methodology in detail. Hidden Economy of Pakistan 3.
Simple Monetary Approach This section provides a simple monetary approach consistent to the seminal attempts of Tanzi for estimating the informal economy of Pakistan. For each year, essay on economy of pakistan, the final predicted value of ratio of currency in circulation and resident foreign currency accounts to money supply is computed by subtracting the regressed values of ratio of currency in circulation and resident foreign currency accounts to money supply without including the tax variable CFM2 wt from the regressed values of ratio of currency in circulation and resident foreign currency accounts to money supply including the tax variable CFM2 t in the regression equations.
The final predicted value of ratio of currency in circulation and resident foreign currency accounts to money supply is divided by so as to remove the percentage. In order to calculate legal money in the economy, the series of illegal money is subtracted from the series of M2 for each year. Essay on economy of pakistan ahead, velocity of money in the underground economy is estimated by dividing the total GDP with legal money. Assuming that the velocity of money is same for both legal and illegal money in the economy, the final estimations for the underground economy is obtained by multiplying the illegal money with the velocity of money for each respective year.
Informal Economy of Pakistan ; Way Forward - English Essay - Iqra Academy Sargodha
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Feb 03, · ECONOMY HISTORY OF PAKISTAN First five decades When it gained independence in from UK. Pakistan's average economic growth rate since independence has been higher than the average growth rate of the world economy during the period. Average annual real GDP growth rates[16] were % in the s, % in the s, and % in the Essays on Pakistan Please enter something FIND ESSAY. Food And Its Relation With Pakistan. Words • The trade openness on the economic system in the whole universe which specially likes Pakistan. The trade openness means so every bit to how a state offers free trade. Trade openness and the economic growing relation is really highly Essay writing about cervical cancer. Descriptive text essay, whats the point of a college essay exemple de dissertation philosophique corrig example of case study method, case study vignette case continued on economic of pakistan problem Essay research papers in medical field. Essay on a happy life
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